It’s not all about the money, some would say that about starting a business. However, in the course of doing business, there are invoices to be settled, computers and supplies to be purchased, staff to be paid, and so on. That’s when business loans come in handy. For small businesses, financing is a lifeline that they can hold onto when in a bind, savings or cash on hand is not enough, or for future growth plans. Business loans can fill in liquidity needs for days, months, or years. »Find out your business loan options here»
Conventional and Alternative Business Loans
Traditional banks and alternative lenders (non-bank entities) offer a range of business loans that respond to all sort of business funding demands. The most common types are:
- Startup Loans: These loans can be in the form of equipment financing, business credit cards, and credit line builder. The latter allows businesses to build a line of credit from various credit cards and draw cash from it for a fee.
- Working Capital Loans: They fill short-term needs for working capital. These short-term loans help keep the business running on a day-to-day basis while looking for additional sources of capital. Long-term working capital can be tapped through SBA loans.
- Term Loans: What business owners have in mind when thinking of business loans. These loans have a term depending on the purpose, e.g. working capital, real estate, or equipment.
- Short Term Loans: These loans have shorter repayment terms and address seasonal demands such as labor costs, inventory, etc. Short term alternative loans may have lower out-of-pocket expenses but are costlier because they have to be repaid quickly.
- Line of Credit: This is when a bank provides a certain amount of money that a business can draw on or borrow when the need arises. The lender will only impose an interest on borrowed funds.
- Equipment Loans: Used to finance a wide range of equipment from office computers, vehicles to machines. Equipment loans are relatively easier to obtain because the equipment serves as collateral for the loan.
Other Business Loans
- Invoice Financing: Billed invoices can be converted into cash. Invoice factoring is ideal for companies with business-to-business (B2B) and/or business-to-government (B2G) models.
- Merchant Cash Advance: The lender will advance a certain amount that can be repaid from your daily credit card sales with no fixed date. Most suited for businesses that transact a large number of credit card payments.
- Professional Practice Loans: They fund the costs of setting up a practice in the legal, healthcare, and other professional fields. These loans can be used to buy office equipment/space, refinance debt, and more.
- Credit Cards for Business: Business credit cards work similarly as personal credit cards. And for business, they are used to build a credit line (credit line builder).
If you are unable to get financing from a commercial bank, you can opt for SBA loans. The Small Business Administration, through its approved lenders, extends financing to small businesses, for up to $750,000. The SBA will guarantee at least 75% of the loan, encouraging lenders to provide loans to businesses that may not have qualified for conventional loans.
Whether it’s for scheduled or unplanned expenses, getting financial help is key to keep your business going especially during its startup phase. We can connect you with a lender that can provide you with that much-needed business loan.