Before you apply for a small business loan, you must know the different types of loans available to choose one that suits your needs the best. Loans must meet the business needs and match with your financial plans to make payments on time without feeling burdened. Besides knowing the types of business loans, you must also know about the different lenders. That offer such loans so that you do some excellent shopping to get the best deal, says Michael Giannulis. Have clarity about why you need the loan, how you want to use it, and how you plan to pay it back and at what time. Paying back loans on time is critical for business health; it can drive you into a cycle of debts and damage the business prospects.
Here are some popular loans.
SBA loan is the first choice of Michael Giannulis
The Small Busines Administration or SBA is the best friend for entrepreneurs to find the best resources and funding they need. SBA is friendlier towards businesses that might not be able to get help otherwise and are at a disadvantage. SBA loans are available from $50,000 to $5,000,000 with a broad range of terms and tenure between 10 and 25 years. However, they follow a traditional process for loan approval that involves a good amount of paperwork and takes time. SBA is not a lender, but facilitates the loan and acts as a guarantor. For a substantial portion of each loan, reducing the lender’s risk and improving the chances of getting a loan.
A business line of credit
When you need quick money, the business line of credit is your best bet. A business line of credit is a revolving credit offered by your bank or any other financial institution that you have a relation with and you can access just as much money as you need during different times instead of borrowing a fixed sum that is more than what you need at that point in time. You can get the money ranging from $1,000 to $5,00,000 in a week or within a fortnight. And the money would always be available while you can withdraw it in lots according to your needs. The financing comes with a 1-2-year maturity, and interest rates can vary from 8% to 24%.
Business term loan
This type of loan suits situations when you need working capital for procuring assets, increase manpower, and plan for business expansion. This type of loan has been popular for long many years because of its reliability. The loan amounts vary between $5,000 to $2,000,000, and the funds are available. In your account in a couple of days. The loans have tenure between 1—5 years and the interest rate can be as low as 6%. The interest rate is flat that ensures fixed monthly payments for the full term. It is easier to figure out the correct amount to borrow without stressing your ability to pay back.