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4 Types of Small Business Loans

by Olufisayo
Small Business Loans

For those who are looking to expand their business or start a new one, money is the most critical factor. There are multiple ways in which one can get a loan to fund your business including firms that offer same day business loans.

#1 Term loans

Businesses have the option of selecting a term loan to finance their business. It is one of the most common types of business financing.

Term loans are short-term to long-term loans given to businesses to meet their working capital requirements, expansions, and purchases. These loans are also known as installment loans, and the period and interest depend on the type of loan selected.

In this, the bank makes the full loan payment to the business/business owner, and the repayment is made on a monthly, quarterly, half-yearly, or annual basis. You will have to repay the amount over the decided period with interest. Moreover, term loans have a higher borrowing limit compared to other loans.

Term loans have some drawbacks, too, and you might have to provide a guarantee or collateral. Also, if you go via a bank, you might have to go through a lengthy process.

#2 Cash loans

Cash loans are a perfect option for small business owners who are simply looking for funds so that their businesses can operate without any hindrances.

It is easy to find and compare deals as there are multiple online lenders to choose from that show all the relevant information. Also, since these have flexible repayments and a low rate of interest, they are considered a good option for business loans.

#3 SBA Loans

Small Business Administration provides loans from $5,000 to $5 million. These can be a significant boost for business people even though these are offered by online lenders and commercial banks.

One of the significant benefits of opting for SBA loans is that lenders can get these at lower APR rates between 5% and 13% and repayments can be made over an extended period. To be eligible for SBA loans, one will need to fill an online application form and have a good credit history.

#4 Business line of credit

The business line of credit is similar to a credit card and is an option for businesses that have a lower credit rating. A business line of credit provides borrowers with certain flexibility that other business loans do not. The borrower can take a certain amount and pay interest only on the portion of the money that is borrowed. After repaying the amount, you can also withdraw more.

Borrowers will have to repay the amount at an APR rate between 7% and 25% and after a period of 6 months to a year.

Choosing the right type of small business loan is essential to fulfilling the company requirement. It can be the difference between a successful venture and failed one. Now that you are aware of the right type of loan and the pros and cons of different kinds of business loans make sure you make the proper selection.

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