5 Types of Business Loans
As a business owner, you should have some general idea of the different types of business loans available so that you can decide what type of financing is suited to your funding needs.
Small business loans target businesses that have at least a year in operations. These loans can come in different forms: the U.S. Small Business Administration (SBA) loans, term loans, business lines of credit, invoice factoring, etc.
The SBA loan is partially guaranteed by the SBA, letting banks offer these loans with low interest rates and long repayment terms. However, the application process is tedious and the requirements are strict. For non-EIDL SBA loans, companies need good personal credit, strong business finances, and the ability to wait a long period before funding comes as the minimum requirements.
Business owners usually use SBA loans to finance one-time purchases, longer investments, buying real estate and other fixed assets, and buying existing businesses.
Business Term Loans
Short-term business loans have a repayment period of 6 months to 1 year, whereas long-term business loan repayment can extend to 10 years or longer. Business term loan financing is primarily used in one-time purchases of specific assets.
Business Line of Credit
Business lines of credits give businesses a flexible source of cash. You decide how much money to withdraw from a predetermined pool of credit, and only make payments and interest on the amount withdrawn. A line of credit can be used to help manage your cash flow, respond to unexpected events and short-term financing needs.
A personal loan for a business can be helpful for newer businesses, as lenders will look towards your personal credit score rather than the business’s.
Business Credit Card
A business credit card is another solution for short-term funding and can be easier to qualify for than other traditional financing options. A card’s credit limit will typically be less than a line of credit but may come with other miscellaneous rewards.
Accel Business Funding offers business line of credit and business loans suited to your financing needs.