Starting a small business requires time, effort, and, most importantly, money. Whether it is to purchase equipment, hire employees, or cover day-to-day expenses, small business owners often need access to financing to grow their businesses. This blog will explore nine types of small business loans that can help you secure funding for your business.
- Term Loans
A term loan is a type of loan that is repaid over a fixed period, typically between one to five years. These loans often have lower interest rates than others but require collateral, such as real estate or equipment, to secure the loan. Term loans are a good option for businesses with a specific project or purchase in mind and need a lump sum of money to complete it.
- SBA Loans
The Small Business Administration (SBA) offers loans to small businesses through approved lenders. SBA loans are popular for small business owners because they typically have lower interest rates and longer repayment terms than traditional bank loans. However, the application process can be lengthy and requires extensive documentation.
- Business Lines of Credit
A business line of credit is a loan that provides a revolving line of credit that can be used for any business expense. The borrower only pays interest on the amount of credit used and can access additional funds as needed. Business lines of credit are a good option for businesses with fluctuating cash flow or unexpected expenses.
- Equipment Loans
Equipment loans are a type of loan that is used to purchase equipment for your business. The equipment secures these loans and often has lower interest rates than other types of loans. Equipment loans are a good option for businesses that need to purchase expensive equipment, such as machinery or vehicles, but need more cash.
- Invoice Factoring and Invoice Financing
Invoice factoring and invoice financing are two types of loans that allow businesses to receive cash for outstanding invoices. Invoice factoring involves selling your invoices to a third-party company at a discount, while invoice financing involves using your outstanding invoices as collateral for a loan. These loans suit businesses with outstanding invoices but need cash to cover day-to-day expenses.
- Commercial Real Estate Loans
Commercial real estate loans purchase or refinance commercial property like a storefront or office building. These loans often have longer repayment terms and lower interest rates than traditional bank loans. Commercial real estate loans are a good option for businesses that must purchase or refinance the property to expand their operations.
Microloans are small loans, typically under $50,000, to start or grow a small business. Non-profit organizations or community lenders often provide these loans. They are a good option for businesses needing a small amount of money to start or grow their operations.
- Merchant Cash Advances
Merchant cash advances are loans that provide cash upfront in exchange for a percentage of future sales. These loans often have high-interest rates and fees, but they are a good option for businesses that need cash quickly and have a steady stream of sales.
- Franchise Loans
Franchise loans are used to purchase a franchise or to expand an existing franchise. The franchisor or a third-party lender often provides these loans and is a good option for entrepreneurs who want to start a business with an established brand and business model.
Securing financing is a critical step in starting and growing a small business. Understanding the different types of loans available can help you choose the right financing option for your business, whether a term loan, SBA loan, business line of credit, or equipment loan.
Secure Finances for Your Small Business with Economic Development Collaborative!
As a small business owner seeking financing, you must familiarize yourself with the several loan options. At the Economic Development Collaborative, we recognize the significance of accessing capital for your business’s growth and prosperity. Whether you require an SBA loan or financing for equipment, we are here to provide comprehensive assistance. Contact us today to obtain the optimal small business loan for your needs.