If you want to retain complete control of your business, but don’t have enough funds to start, consider a small business loan. Depending on your business style and what you need the funds for, you might want to consider a line of credit, merchant cash advance or any type of business loan. Choosing the right option will set you up for success.
What is a business loan?
It is any type of financing that will be used to fund business expenses like paying staff wages to purchase inventory. To be eligible, your business needs to be at least six months old and bring in over $50,000 a year in revenue to qualify. Factors like your personal credit score and relationship with the lender will also play a role. It is available through bank institutions, credit unions and online lenders.
Types of Business Loans
There’s a variety of business loan options to choose from. It will come down to the type of business you have and what it needs funding for.
1) Terms Loans – These are typically unsecured and ideal for covering a one time expense. You can receive a lump sum from $5,000 to $5 Million with interest and fees over five to 25 years.
2) Small Business Administration Loans – These are for business owners who had struggled to get approved for financing in the past. These loans come with more competitive rates since they’re partially backed by the government. The application process may take months to complete.
3) Lines of Credit – Depending on the lender, you’ll either be in a monthly fixed installments over a set term or a pay-as-you-go setup.
4) Equipment and vehicle financing – Rates tend to be lower than with their unsecured counterparts but you risk losing your assets to default.
5) Short Term Loans – These are ideal for businesses that need emergency funds quickly.
5 Top Reasons To Get A Business Loan
If your business is ready to take a leap, but you don’t have the capital to do so, here are five reasons you might re-consider applying for a business loan.
1) Expanding your business
As your business grows, it will become more stable. Investing in your business growth potential will also be an opportunity for you to keep up with the market demand.
2) Emergency funds
If you find it difficult to apply for substantial loans because of a lack of good credit score, you can use a small short term loan to build up your company equity.
3) Equipment and Vehicle funds
Investing in the right equipment was one way to grow a business especially if the business had been operating for some time with old equipment.
4) Purchasing more inventory
Inventory is one of the most important company expenditures, regardless of the size sector. You should make sure you have enough stock with the right quantity and quality to meet demand.
5) Improve Cash Flow
Positive cash flows help businesses adapt to evolving dilemmas and make important decisions more quickly.
If you are considering applying for a business loan, you need to be aware of the pros and cons. You might be putting your business or personal assets at risk. Remember to do your research if you are considering borrowing money for your business. Furthermore, there are different loans available in the market today that may help you finance your small business or startup company.
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4) “Reasons to Take Out a Business Loan” BalanceSMB. Retrieved December 9,2021 from: Reasons to Take out a Business Loan (thebalancesmb.com)