Did you know there are over 30 million small businesses in the U.S.?
Are you a small business owner yourself? Or are you thinking of starting your own business in the near future?
Either way, a major obstacle you might face is getting the funds you need to launch your startup. In fact, over 40% of small business owners apply for a loan each year.
Are you familiar with the different types of business loans that are out there? Read on to discover which loan could be the perfect one for you.
1. Business Term Loan
Perhaps the most common type of business loan, this traditional loan gives you a lump sum upfront that you’ll repay over several years.
Term loans are available for as little as $1,000 or up to $500,000 or more. Interest rates vary from 7% to 30% (depending on your credit history). Most loan terms last from one to seven years.
A great advantage of this type of loan is that it requires no collateral, which means less risk for you.
2. SBA Loan
The US Small Business Administration (SBA) partially backs these loans that range from $5,000 to $5 million.
These types of loans usually offer lower interest rates (5% to 13%) and longer repayment terms (up to 25 years). Each of these factors can be a huge bonus to a new company.
The drawback of SBA loans is the time-consuming application process. You’ll also need stellar credit if you hope to qualify for one of these government-backed loans.
3. Business Line of Credit
For some, the choice may come down to a personal loan vs line of credit.
A business line of credit works much the same as a personal credit card. You’ll be preapproved for a maximum amount of credit you can use any time you need it.
Average interest rates are 7% to 25%, and repayment terms can be anywhere from six months to a year. The good news is these types of loans move quick, with many business owners being approved in a day.
4. Invoice Factoring
This is a unique type of loan where you sell any unpaid invoices in exchange for a cash advance.
The lending company will collect the invoice amount from your client and pay you the remaining percentage (minus fees). Some will advance you the entire amount and then charge a flat weekly or monthly fee while you make repayments.
If you’re facing cash flow issues or have less than stellar credit, this could be an excellent loan option for you.
Different Types of Business Loans: Now You Know
Starting your own business takes guts and determination. It also takes a certain amount of capital, which you might not have on-hand.
The good news is there are many different types of business loans for people just like you. If you need a loan to get your business off the ground, consider one of the options listed above.
With a little luck, you’ll soon have the funding you need to turn your dream into a reality!
Did you find this article helpful? Be sure to browse our other business posts for more great advice.