Small business loans are financial aids that support entrepreneurs in establishing, sustaining, or growing their businesses. These loans can be used for various purposes such as buying stock, acquiring new machinery, or handling unexpected costs.
Obtaining a business loan doesn't necessarily mean you have to visit a bank physically. There are several online lenders offering small business loans, often with simpler requirements and quicker application processes.
There's a wide range of business loans available, with repayment periods ranging from a few months to 25 years. These loans can be sourced from traditional banks, credit unions, online lenders, and even the U.S. Small Business Administration.
Term loans for businesses offer a one-time lump sum of money, which is repaid in fixed monthly or weekly payments with interest. Short-term business loans, typically available from online lenders, have repayment periods ranging from a few months to over a year. Long-term business loans, often provided by traditional banks, can extend up to 10 years.
A business line of credit operates similarly to a credit card. It's a flexible financing option where you only pay interest on the amount you borrow. This can be particularly useful for recurring costs like rent or inventory purchases.
Equipment financing, also known as equipment loans, allows businesses to buy essential equipment such as heavy machinery, computers, vehicles, etc. The purchased equipment serves as collateral for the loan.
Commercial real estate loans enable businesses to buy, construct, or refurbish properties for business purposes. These loans work similarly to home mortgages, but they may require a larger initial down payment.
SBA loans, backed by the U.S. Small Business Administration, provide long-term repayment options with relatively low interest rates. The 7(a) loan can provide up to $5 million for various business needs, while the 504/CDC loan is typically used for buying fixed assets such as equipment or property. Applications for these loans are made through a bank or online lender, not directly with the SBA.
Microloans are loans of $50,000 or less, provided by the SBA and several nonprofit or community organizations. They are often aimed at startups or business owners who are women or people of color.
Working capital loans are a type of financing used to manage short-term operating costs, such as payroll or bridging cash flow gaps. These loans can take various forms, including lines of credit, term loans, and cash advances.
Invoice factoring is a financing method that allows businesses to access cash from unpaid invoices by selling them to a factoring company for a cash advance. This can be a suitable option for businesses with limited or poor credit, but it can be costly as you'll only receive 60% to 90% of your invoice value, depending on your industry.
