Getting a business loan is a great way to jumpstart your business, no matter what industry you’re operating in. It’s the backing capital you need to get your business off the ground and up to its optimal profit making potential. It’s also the perfect way to fund your next expansion project.
There are so many different types of business loans that you can easily get the wrong loan for your business without realizing it. So, to help you out, we are going to look at 9 different types of business loans. You can apply for these loans to get off the ground, revamp your technology, or soar to new heights as a business.
1. SBA Loan
SBA loans are government backed loans, and they are perfect for businesses that struggle to receive loan approvals at banks. These long-term loans tend to last from 5 to 25 years, and have interest rates usually starting at 6.5%. You can get anywhere from $5000 to $5 million with an SBA loan, and approvals happen in as little as 3 weeks. That makes an SBA loan a low interest and high versatility loan option.
2. Term Loans
Term loan are similar to a traditional loan because they give you lump sums of funding on approval. With terms ranging from 1-6 years and approvals happening in as little as 2 days, term loans are a great way to pad you money on hand if you know you can budget it right. That means using what you need and developing a payment plan for the 7-30% interest rate.
3. Equipment Financing
Let’s say you need to upgrade your equipment or replace a broken machine, but you don’t have the up front finances to pay for it. This is where equipment financing comes into play. You can get upfront funds to pay for your expensive machinery. You just have to pay back the total lent and fees in the allotted timeframe. The terms are normally set for the expected life of the equipment purchased, so this is a great way to finance a machine that more than pay for itself.
4. Business Line of Credit
Having a business line of a credit is like having access to everything your business needs in the palm of your hands. It’s basically the same as having a credit card, and functions much the same. You are given an allowance from $10,000 to $1 million dollars that you can tap into as you need it. As you tap into it, you will have to pay back what you take, and those payback terms can be anywhere from 6 months to 5 years depending on the amount. The best part about a business line of credit is the application approval speed. It can happen in as little as one day, especially if you are an established business looking for a bit more capital to operate with.
5. Invoice Financing
If you have high profit margins, this might be a great way to get a loan and pay it back without changing your daily operations. This type of loan advances your invoices to a lender where they take anywhere from half to 90% of the invoice amount as a payment. This happens until your loan is repaid, and you don’t have change your daily operations at all.
6. Short-Term Loans
Short term loans are a great way to make a project or business event happen. It provides you with anywhere from $2500 to $250,000 that you can pay over a period of 3 to 18 months. So if you are doing a touring festival, this could be a great way to get your upfront funds and pay them back in a quick manner. Their quick approval times make them the “spend money to make money” style loan.
7. Merchant Cash Advance
Merchant cash advance loans allow you get upfront funds and repay them through a small fee on credit card transactions. Your payment is automatically deducted each day through your account transactions. These loans can be anywhere from $2500 to $250,000.
8. Small Business Startup Loan
The ultimate way to get your business of the ground is a small business start up loan. These loans combine the benefits of business credit cards, business lines of credit, and equipment financing. Although these loans are limited to a $150,000 max, this the best way to make sure your business can get everything it needs to evolve at a proper pace. Funding is everything for a startup, and this is the best way to get over the financial barrier of entry in your industry.
9. Personal Business Loan
If your business is fresh like the morning dew to the market, chances are you are having problems getting approved for loans due to a lack of financial history. If this sounds like your business, you might want to look into a personal loan. Believe it or not, you can use a personal loan to fund your business operations. Although these loans max out at $35,000, they have a potential for a substantially lower interest rate than most loans. Not to mention, $35,000 is a lot of breathing room for a brand new business, and could be a great way to go from no business to profitable without having to face a $100,000 or more bill in the next 3 to 5 years.
Find Your Loan
At the end of the day, the right loan depends on your business’ needs. The best way to find the right loan for you is by making a plan that details every bit of your plan for the loan. Once you have that, you can find a loan calculator to give you a better idea of just how much you should ask for. You should also talk to a few financial experts about your loan options. Check this free business checking too to learn more options.
What type of business loan did you get for your business? Is there a reason you picked one type of loan over another? Share your stories in the comments below.