Types of Small Business Loans
If you want to apply for small business loan, you have to determine the various types that you must deal with.
The loans can meet the different requirements of the business owners. Know the differences and apply for the right loan.
When you decide to open a small business, there are different types of loans that you must be familiar with. During startup and on the initial months of operation, you will need money. At this point, you will be applying for loans once in a while. As long as you know the options available to you, you can take your pick. Find out the types of small business loans that you can avail just in case you’re in need of money. For your operating expenses, you can secure an operating loan. Some lenders also call it working capital, overdraft protection, or line of credit.
The Different Loans for Businesses
The cash flow of a new business can fluctuate any time and you must have enough cash to cover the day to day expenses. When you’re running a retail store or a restaurant, the operating loans can be very useful. Another type is the term loan. This loan has interest payments and monthly principal. With every payment, the principal amount decreases. This loan is great for securing equipment like computers. You have to make sure that the period for amortization matches with the asset’s useful life. These loans can be paid under five years, depending on the terms of the borrower.
If you live in the USA, you can apply for the SBA loan. If you qualify, you can apply for this loan. The government guarantees the repayment and so the bank will be more than willing to grant the loan. Before you can receive money, you must seek approval from SBA (Small Business Association). The SBA 7 (a) allows a business to receive maximum amount of $1M. You can use the money as working capital, for real estate, and for buying equipment. The SBA MicroLoan can provide a borrower with about $25,000 which can be paid within six years. The SBA 504 can be used to increase a company’ employment level and this is a great option as well.
The merchant account is ideal for online businesses. You can even file an application online. Mortgage can be used for purchasing land or building. The amortization period can last for 10-30 years. The lending criteria will tend to vary from one lender to another, so you must shop around. Now that you know some of the types of small business loans, you can now choose the most suitable loan that meets your standards or criteria. This is not hard and with a bit of research, you can get the needed money.
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