You have the perfect idea for a business startup that you’re sure will make a big profit within the next few years. However, you don’t have the capital required to get it off the ground. How do you generate business growth if you can’t afford to fuel it?
The average small business owner can utilize all kinds of loans to get started. As long as they demonstrate that they have a plan and a profitable idea, then they can get approved for one.
These are just a few of the different types of business loans available today.
A term loan is one of the most common types you can find. This involves getting a lump sum of cash that you then repay later on, with interest.
The benefit is that you get cash much faster than at a bank. However, you often have to put down collateral and it may have higher interest rates.
They’re a good option if you have good credit and want to expand your business.
An equipment loan helps your business afford the new equipment it needs. That may be financing for new trucks, forklifts, or other machinery.
Equipment financing lets you own the equipment, but it may become outdated by the time you pay off the loan. It’s important to look for one that balances the two, so you can upgrade when it’s paid off.
Merchant Cash Advances
A merchant cash advance is another type of lump sum. Instead of fixed payments, you repay it through your credit and debit card sales. They also allow you to sell accounts receivables at a low price.
All you need to apply is identification, your business account and routing numbers, and your recent business bank and credit card statements.
Small business owners with a startup can make use of a personal loan. These loans aren’t typically used for businesses, as the borrowing amount caps out at $50,000. However, it is a source of fast funding.
Keep in mind that failure to repay on a personal loan can hurt your credit, and they usually come with high borrowing costs.
Business Credit Cards
Business credit cards are good for ongoing business expenses and can earn you rewards on your purchases. They function like normal credit cards in that you can draw funds from them and repay them as needed.
A business will usually use these cards for more minor ongoing expenses, like for travel or utilities.
Navigating Different Types of Business Loans
So which of the many types of business loans is right for yours? Startups generally don’t need a lot of money to get their business going, so something like a personal loan may be enough if necessary. Term loans are the better option if you need a much larger amount, though it’s riskier for the company.
Check out some of our other articles if you’d like to learn more about business and money topics.