Types of Loans You Can Use For Your Small Business
A small business owner may find they need loans to help with expenses. You might need money for expansion, marketing, equipment, or rent. You can use a loan for your business in several ways, depending on your needs and goals. Small companies have several types of loans available that they can apply for, like SBA loans, microloans, and startup loans. The main things to be aware of are the requirements for the loan. Here are some types of funding you can get for your company.
Microloans are great for small business owners that need a small amount of money for their venture. These funding types usually have short repayment terms and low to no interest rates. Another thing to be aware of is that the qualification criteria are more flexible than other loans.
Generally, businesses can borrow up to $50,000. However, understand microlenders usually serve underserved owners, like women or minorities. The money usually comes from nonprofit organizations.
These loans have a government guarantee and reduce the risk for the lender. Small businesses are encouraged to apply for SBA loans, and there are a few you can research. These include the SBA 7(a) loans, SBA 504 loans, and SBA microloans.
Research to see which suits your needs and goals best, and then look at the qualification requirements. Another thing to consider is how long of a repayment term you have. Some loans last up to 25 years.
You may discover you are ineligible for some loans if you are a brand-new business that has been around for less than a year. Startup loans are specifically for newer companies. You will find a variety of loans, including business credit cards and online loans. Because of this, you need to know the terms of each kind of loan. This way, you understand what lenders are expecting from you.
If you run a business that uses equipment, you may need a way to finance your machinery. Generally, the equipment you buy with the loan is also the collateral. Understand that if you default, your lender will take the machinery back. However, this loan can be valuable because you can get better interest rates due to the lower investment risk.
Running a small business is not always easy. You may find yourself needing money to cover unexpected expenses. Use these tips to help you decide if you need a small business loan.