Types of Business Loans
It takes a lot of money to maintain a business, usually more than the average entrepreneur has access to. Normally, a business owner will need different types of business loans periodically throughout the lifespan of the organization to start the venture and for its continual growth. To meet these different needs, the financing industry has created many different types of loans and financing options. Which loan is the best depends on your situation: Do you need flexibility? Do you need to get capital fast? Do you need a lot all at once? Use our list of types of business loans to find which financing option may be best for your new or growing business.
Small Business Loans
Small business loans are the most ubiquitous type of loan, often with regulated loan rates and a payback period of between five and 20 years of monthly installments. They’re usually broken down into long-term loans, with longer payback periods, and short-term loans, featuring faster payback of amounts usually less than $1,000,000. A traditional lender may take as long as a few months to approve a business loan after the application is submitted, while BFS Capital can give you an answer fast and provide funding in as few as two business days. We also have flexible repayment options. You can apply online now to see if you qualify for a BFS Capital small business loan.
Invoice financing, also known as accounts receivable financing, doesn’t usually require a credit check. If your business has consistently large accounts receivable, you may be able to receive an advance that’s a percentage of that amount. These are usually short-term solutions that need to be paid back relatively quickly. Because there’s no collateral, the fees can be high.
The Small Business Administration offers solutions for qualified small businesses that can’t get money through other means and meet the SBA definition of a small business in that specific industry. The SBA itself doesn’t provide the loan, but it helps mitigate the risk for lenders. These loans are definitely something to consider, but the SBA doesn’t offer everything; the loans are just a good backup to keep in mind. It can take a long time to get approval, and there’s usually a lot of paperwork, so this is not an option for when you need to get access to needed funding quickly.
Lines of Credit
Instead of getting a lump sum, a short-term line-of-credit loan provides business owners the chance to tap into funds when they need them. They don’t need to apply over and over, and they won’t need to pay interest until the funds are used. A line of credit can be secured with collateral (such as equipment) or unsecured. The rules behind these lines of credit depend on the bank or lender providing them; some lines of credit are renewed automatically every year, for instance. It’s a good idea to read the fine print of the agreement before opening a line of credit.
Business equipment financing loans can function similarly to personal auto loans; you buy equipment with the loan, and the collateral is the equipment itself. They often have fixed interest rates and fixed term lengths. These are a good idea if your business needs to make a big purchase of a necessary tool.
Merchant Cash Advances
A merchant cash advance is one of the faster and most flexible funding solutions, which can often be obtained online with minimal paperwork. It considers expected future credit card sales, given your businesses history. Out of the types of business loans available for those without a high credit score, this is one of the most viable choices.
Other Common Types of Loans for Business
- Business Expansion Loans: One can use a small business loan or advance as an expansion loan to help sustain or react to sudden growth.
- Franchise Loans: If you’re an operator of a franchise, you can get access to different types of franchise loans.
- Professional Practice Loans: Most often for legal, insurance, or medical offices, these loans are used for helping practices that need to purchase or rent office space, among other practical financial needs.
These are just a sampling of the different types of business loans that are available to a business owner with good or bad credit. If you’re wondering which types of loans for business capital would be best for your company, contact the team at BFS Capital!