Starting up a business can be an arm and a leg, and so can expanding one. No matter where in your business life, you may be, whether it is a start-up or growth, a little cash to fund your business can go a long way. You need access to business funds for your business to thrive and grow. But the question is, how and where you can get the money.
A survey exploring the state of small business by a group of Federal Reserve banks was done back in 2019 in which they found out that 43 percent of small start-ups are on the lookout for external funds, and seven out of 10 small firms sustain outstanding debt. However, 56 percent of them apply for the expansion of the business, buy business assets, or look for new opportunities, and 44 percent acquire funds for operating expenses.
The results also show that usually, businesses apply to large lending institutions and online banks for such funds using either other small banks or credit unions.
When you are considering such financing, it is essential to look at all the options available so you can pick the one most suitable for you. Below we have listed down the best business loan options.
LONG TERM LOANS
If you are a business consideringtherightamount in funding, then the long term or term loans areyour perfect option. The process of obtaining this loan is time-consuming, though, as large banks approve 25 percent of the small business loan requests.
If the application does get approved, you will have to fill in onprinciple amount, including the interest rate, until all your debts paid. A long term loan in many stances used to acquire another business, buy real estate, long term business expansion, or renovate a commercial space.
Start-upsnot advised to opt for long term loans because lenders always want to have a background check of your business record before taking up the risk.
You may ask how to get a business loan online? When it comes to giving out loans, lenders tend to be quite skeptical. Lucky for you, some platforms provide online loans, which can even be very beneficial for small businesses.
You have to fill out an online application that fills out faster than you can say, Jack Robinson, and you will be given the results immediately as compared to the lenders who take days or weeks to review the application. You can use this online loan to:
- To manage the company’s cash flows.
- To handle any unexpected problems faced by your company.
- To improve the company’s creditworthiness.
SHORT TERM LOANS
The name makes it pretty clear. A short term loan is a fast track option for the businesses in emergencies, narrowing the cash flow gaps, paying off the higher debts.
Having a weak or low credit score is not a cause of concern because you don’t have to worry about your application to get approved. Piles and piles of paperwork would be the least of your worries. These loans are also fast processing.
There, however, is a minor detail that you need to take into account since the loan is short term, the time frame to repay the loan is quick as well. Usually, it is two years, with a daily or weekly basis payment schedule. You also should keep in mind that loan limits are often capped, in case you need a loan exceeding that limit, you have to look elsewhere.
Secured loans are loans for businesses that look for options with relatively low-interest rates or have poor credit scores. To get this kind of loan, you need to provide security to your lender in the form of your assets, equipment, inventory, or invoices.
For a small business, a loan backed up by your property is the only way for you to acquire financing.
Some loansmeant to be for a specific type of purchase, the most essential of them being transport or equipment for production. An equipment loan would help you get the right tools you need to deliver the goods to your customers on time.
You can use this kind of loan to buy various equipment that would assist in the production process. Itcould also include a vehicle to transport the product to the desired location. You should be prepared to use this equipment as a surety for the loan.
You can enjoy several benefits with this kind of loan, like lower interest rates or fast track application procedures, which is not the case with the traditional loans. Getting qualified for a loan like this is a piece of cake.
It is not always necessary to follow the tradition by taking a loan from the online vendors or the bank; peer-to-peer (P2P) lending can help you by getting an individual investor. This option is best if you are searching for minimum eligibility requirements.
For P2P lending, you need to be in a P2P market place;there are many options to choose from, like Lending Club, Prosper, or Fund Circle. Bonus:The interest rates are not as high as you can imagine. Setback: Only apply for this loan if you have time because it takes weeks to get the funds up and running.
For a personal loan, you need to use your credit to get your company the money you need. For this, make sure that you have a reputable credit background to save your business from future damages.
The maximum limit for a personal loan is around $100,000. You need to make sure that this amount fits your needs. Incase your bank does not offer a personal loan, then you need to look around and see who else does. This loan again fits best for start-ups or small businesses.
The kind of loan that you plan to go for highly depends on your long-term financial plans or a specific need. You need to take into consideration the ability to pay back the loan and the timeframe.
Some loans offer you the money as per your need so you can save money and pay a lower interest rate, whereas others would allow you to use your business or personal loans in the time of need.
Whatever option you pick, the loan would allow you to either kick-start or expand your company, and you can then pay them back quickly.