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- 1. SBA Loan
- 2. Line of Credit
- 3. Invoicing Loan
- 4. Equipment Loan
- 5. Bridge Loan
- Now You Know the Different Types of Business Loans
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Are you worried about your business running out of money in the future? You have reason to worry.
Problems with cash flow are one of the primary reasons that companies fail. If you don’t have funding resources, your business runs the risk of shutting down when you face problems.
There are many different types of business loans available, so it pays to know about them before shopping around. Below are five common types of business loans that are worth investigating.
Make sure you read 3 Common Mistakes With Business Loans to Avoid for Startups before you apply for any loans.
1. SBA Loan
For businesses that don’t have a hard time getting conventional loans, an SBA loan is a great option. These loans for business owners are provided by traditional lenders but backed by the small business administration. Being backed by the government means less risk to banks, so you’re less likely to be denied a loan.
The typical interest rate is between 5% and 13% and has an average term of six years. These are general purpose loans, so you can use them for almost anything you can think of.
2. Line of Credit
If you think you might need money in the future but aren’t in a position to use it now, it makes sense to line up your options before that time comes. A line of credit will help you do that.
Instead of getting a lump sum from a loan, a line of credit allows you to borrow on a credit line. You only take what you need and pay back your credit over time. Your monthly payment will be your interest, which allows you to pay back the principal as you’re able.
3. Invoicing Loan
Many businesses rely on invoices to receive payment. It’s common for B2B businesses that make high dollar sales. The problem is that you can’t always rely on other companies to pay their invoices on time.
If you run a tight ship, you might not be able to afford missing several invoice payments at once. An invoicing loan will help hold you over. You can use your invoice as collateral and pay back your loan with a fee once your customers pay their invoices.
4. Equipment Loan
If you need new equipment to run your business, don’t settle for traditional business loans. While you can use those loans to fund your purchases, they aren’t ideal for the situation. Equipment loans are what you need.
An equipment loan uses the equipment you purchase as collateral for the loan. This means you can get better terms on the loan since your lender can collect your equipment in cases where you can’t make your payments.
5. Bridge Loan
Sometimes you need money quickly but don’t have time to wait for more conventional loans for business. A bridge loan can hold you over in this situation.
A bridge loan acts as a temporary loan until you gain a traditional financing offer. Just be aware that you’ll pay for this convenience with extra fees. Make sure you have a better understanding of this loan before you resort to getting one.
Now You Know the Different Types of Business Loans
There isn’t a one-size-fits-all solution for business loans. You need to be specific to increase the chances of a lender providing you the money your business requires. Make sure you research the different types of business loans available to you so you find one that’s perfect for what you need.
Do you want to learn more finance tips for companies? Keep reading our blog to discover our best business finance tips.
Thank you for reading!