Running a business takes passion, commitment, hard work, and a whole lot of cash. No matter what type of enterprise you’ve started, to get it up and running and keep it afloat, you’ll need to have a huge chunk of change. From equipment and supplies to marketing and staffing, there will be a lot you have to pay for. Unless you’re already turning a huge profit, you’ll need to look to resources beyond your bank account to get the money you need. That’s where small business loans are useful.
Small Business Loans
Got a business idea but no money to bring it to life? Need to cover startup costs, but don’t have much in savings? Perhaps cash flow is minimal and you need some money for operational expenses? In any of these financial circumstances, entrepreneurs have the option to turn to banks and private lenders for relief. There are several different business financing options that you can take advantage of.
Term Loans – One of the most common types of loans for small businesses are term loans. These are provided by banks and online lenders to eligible parties. If approved, funds totaling a few hundred or even a million dollars gets deposited into your business checking account and are to be repaid, with interest, within a predetermined amount of time. These loans are pretty tough to get approved for, however, as you’ll need to have great personal and professional credit. You’ll also need to have an established business with a track record of success. Such loans are ideal for those who are looking to expand or need funds to tide them over during a slow season.
Business Lines of Credit – Another loan available to small businesses is a line of credit. Working similar to a credit card, these products are best for seasonal businesses, for covering unexpected expenses or for companies that need a boost in their cash flow. Entrepreneurs who apply for a line of credit are approved for a loan amount. This amount can be used all at once and paid off, or used as needed and taken in increments over time. You only pay interest on the portion borrowed and can use the funds as frequently as you need to without having to reapply every time.
Equipment Loan – If you’re in need of equipment to run your business but can’t get the proper funding, an equipment loan may be considered. Generally, this can only be used for the purpose of buying equipment which serves as collateral until the loan has been paid in full. The fuamount depends on the type of equipment needed and the value of it at the time of purchase.
Invoice Factoring or Financing – Are your accounts receivables messing up your cash flow? If you’ve got a few delinquent customer or client accounts that you’re having difficulty collecting on, there is a way you can get the cash for them. You’d sell your invoices to a factoring company and get cash upfront. Though you won’t get the full amount of the invoice payment, you’ll get rid of some pretty delinquent accounts and get the cash you need right away. If you’d like to get the full balance for your invoices, there’s also invoice financing in which you use the invoices as collateral to borrow money from a financing company and continue to collect on those accounts.
Personal Loans – If your business isn’t well established yet (or hasn’t even started), your best and only option may be to apply for a personal loan. Personal loans can be used for just about anything professional, however, you won’t have to show a bunch of financial backing for the business. Instead, they use your personal information to determine the loan amount and your creditworthiness.
There will come a time during your journey as an entrepreneur that you’ll need more funds than you have to spare. When this happens, there are small business loans out there you could take advantage of. Whichever option you’re considering, be sure to take your time in choosing the best loan based on rates, fees, quality of service, and what works for you and your budget. Lastly, remember to be responsible for repaying the loan to ensure that if you ever need to borrow money again (and you will), that you have a trusted lender you can turn to.