Small businesses are manifestations of huge aspirations. The small scale firms are the promises for the future. The major part of the economy is based on small firms. Under the fierce competition between these small level firms and the big firms, we consumers have competitive services and products.
Starting a small business can be challenging tough. Even once we manage to start a firm, we may be posed with challenges to maintain it; being destitute of funds is the most common challenge we are likely to face. Moreover, in need of funds, we are likely to get perplexed as to which option is the best.
Here are a few good small business loan options.
1- Term loans
It is one of the most standard forms of loan financing. In this loan, you get a lump sum cash in one go; you can pay it off later in installments within a mutually agreed timeframe. Some online money loaners can offer term loans for up to $1 million. They, at times, provide faster financing than banks, usually within a week instead of up to several months.
This type of loan is best for small scale businesses that want to start or are impeded due to financial lack. With this loan, you can cash upfront for investment in your firm. The amount of borrowing is typically higher. The recipient would have to guarantee collateral; it is an asset the loan company can sell to recover their money from you.
2- SBA loans
The Small Business Administration (SBA) loan is offered by the Small Business Administration- a US government agency that provides support to entrepreneurs and small businesses. This agency guarantees this loan that is given by banks and other finance lenders.
The repayment period is given based on your ability to use the money. The repayment duration differs between seven years for working capital, ten years for buying equipment, and twenty-five years for purchases of real estate.
This type of loan has the lowest rates in the market. It gives you high borrowings of up to $5 million. However, it isn’t straightforward to qualify for it. The application process is long and time-consuming.
3- Equipment loans
This type of loan is ideal for buying equipment for your company. It is not suitable if you want overall financial help for your company. The term of the loan is decided on the life expectancy of the equipment you wish to buy with the loan amount. The equipment is the collateral for the loan amount until repayment. The interest rates are based on the value of the equipment and the strength of your business.
With this loan, you can buy your equipment and build equity in it. If you have strong credit and business finances, then you can get competitive rates. However, you may have to make a down payment.
4- Invoice factoring
If your business has unpaid invoices from customers and they ought to be paid in sixty days, and can’t wait that long, then you can withdraw money from invoice factoring. You can sell the invoices to a factoring company; they will give you the finance and later on will collect the dues from the customers.
With this option, you can get fast cash for your business. The approval is quicker than a traditional funding option. The interest rates are higher than the other options, though. Also, you do not have control over the collections of the invoices.
These were some of the most prevalent small business loan options. Wisely choosing one will help you save by paying a lower interest rate.