There are plenty of ways to keep finances in check. But business owners looking to fund a small business may need all the financing they can get!
For those unsure of the different types of business loans out there, here are 8 small business funding options that could work for most big or small businesses out there today!
Bank Term Loans
Probably one of the hardest loans to obtain for a blooming business is a bank loan. Start-up businesses cannot afford to waste too much time with a long inquiry process, and most banks require long waiting periods.
Even with a copious amount of preparation and years of experience as a business, a bank could still decline potential borrowers due to strict qualifications.
Pros
- Great for long-term business expansion.
- Small business funding could be more than expected if an owner does qualify for one!
Cons
- Most business loans from a bank are declined.
- Borrower must have strong credit and finances.
- Long terms and likely high repayments (depend on credit and other details)
Although, some financial institutions still offer business loans for bad credit businesses.
Personal Loans
Perhaps the business loan that someone could be looking for may be found through a personal loan. Personal loans can be used for almost any kind of funding, including for those that may need funding for their start-up.
Although there are a variety of personal loans to consider, most can be obtained through major financial institutions. The loan amounts may be smaller based on state, credit, or other criteria, but certainly have more flexibility than bank loans.
For individuals that need funding to get started on their initial business inception, a personal loan is a great place to start. Using a personal loan is also a great place to begin planting the seeds of great credit—if repayment is done on-time.
Pros
- Might not need credit to apply.
- Great for those that need funding under a certain amount of time.
- Can help those that need funding to build credit.
Cons
- Funding may not be as substantial as other types of loans.
Hard Money Loans
For those that need small business funding and are just getting started, hard money loans are probably the first option they consider.
Hard money loans are loans used for the purchase of real estate, as well as other fixed assets that all originate from private investors. Hard money loans can be beneficial because of the streamlined approach and the use of property as collateral versus credit. With hard money loans, hard money lenders get a lien against the real estate property which acts as security or collateral for the loan.
Pros
- Capital assets, real estate, and other needs someone requires for small business funding.
- Usually available to those just starting their business.
Cons
- If someone has great credit, they could probably get a better deal with a bank loan.
- Hard money loans can end up being very expensive.
- High interest rates are common for hard money loans.
Short-Term Loans
A short-term loan is perfect for those with varying degrees of credit (or even none), but they do require collateral. Short-term loans are usually found all over most states, but their tight regulations make them difficult to obtain in certain states.
Pros
- Great for those that are just starting out, even with bad or zero credit.
- Inquiry process has been streamlined online for those that don’t want to leave their house.
- Very fast and relatively easy to get (less than a single business day).
Cons
- May not be available in certain states.
- Requires collateral, meaning there is the risk of repossession for those that default on the loan!
Online Term Loans
Like bank term loans, online lenders also offer term loans.
A lender like Plenti offers an online term loan that provides a fixed amount of money, and the borrower pays back the money every month for a certain period.
But like short-term business loans, online term loans tend to have shorter terms on these online loans. Most don’t even go beyond five years.
Pros
- Shorter terms on their loans.
- More convenient because they are online!
Cons
- More expensive than bank loans.
- Interest rates can end up being high in the long-run.
Line of Credit
Imagine being able to get small business funding when needed, especially when times are rough and equipment or expansion is required to succeed.
Lines of credit allow institutions to provide a certain amount of funding, whether fixed or revolving.
A revolving line of credit acts like a credit card, in which the amount of funding resets after paying off the amount owed each month.
Pros
- A great cash cushion for business owners with great credit.
- Options that provide convenient funding when needed.
Cons
- Bad for small business funding if the owner does not have established credit.
- Rates could go up if one fails to pay off the amount.
- Bank qualifications may vary.
Business Credit Cards
Small business loans that could be recommended for those looking to expand or receive funding on their own terms should just consider getting business credit cards.
Like normal credit cards, they are an affordable way to get small business funding to pay off expenses when personal funding is not available.
Pros
- Fast and convenient for those that need funding right when they need it!
- Given a certain credit limit, like any other credit card.
- Paying it off every month is easy!
Cons
- May need long-term financing or lots of capital.
- Those who only pay the minimum on a regular credit card should skip this (high interest rates).
Invoice Financing
A popular small business funding option, invoice financing allows someone to use their outstanding invoices to get a cash advance from the lender.
For those that need funding and have cash flow problems, invoice financing could be used to cover payroll, rent, and other operating expenses.
Pros
- For those that want to resolve cash flow problems that stem from unpaid invoices.
Cons
- Not helpful if your business does not invoice customers.
Got any more business loan recommendations that other people should know about? Tell us in the comments below!
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