Having the capital and resources necessary to maintain, expand or just get started in your business is essential. Many entrepreneurs turn to lenders for a business loan in order to give their business the boost it needs. Small businesses are responsible for creating two out of three net new jobs in America, so lenders often set aside monies to help small businesses obtain the resources they need, including an Courtier Immobilier Gatineau.
What Are the Different Types of Business Loans?
The type of loan you decide upon will depend on your finances and the purpose of the loan. Here’s a look at some of the options available to you:
Short-Term Loans – These are typically used to cover expenses that have to be paid quickly, such as utility bills, inventory supply, payroll costs, etc. Short-term loans can usually be received within seven to thirty days and repaid within six months.
Intermediate/Mid-Term Loans – This type of financing may be used to finance growth capital from companies that may not qualify for longer term loans or lines of credit. They often have repayment terms of one to five years and a higher rate of interest than long term loans.
Long-Term Loans – Longer-term loans tend to have terms of five years or more and are great for larger purchases, such as expanding or purchasing a facility or equipment. Their rates tend to be lower than those of other types of loans due to their longer repayment period.
Equipment Loans – If you’re looking to purchase equipment or machinery, this type of loan is perfect. Rates are usually low and they are often tailored to the life cycle of the equipment. Additionally, the equipment itself serves as collateral, which helps to keep the interest rate even lower.
Startup Loans – If you’re just beginning and don’t have any of the typical forms of collateral, such as real estate or equipment, this type of loan might be right for you. Terms can vary but generally include a lower down payment and a longer repayment period.
Where Can You Find a Business Loan?
You can explore a range of options when searching for a business loan. Many traditional financial institutions, such as banks, offer business loans, as do online lenders. Additionally, the U.S. Small Business Administration (SBA) also offers several types of loans to businesses who meet certain criteria.
SBA loans may provide access to capital with low down payments and flexible terms. SBA loans, however, often require lengthy applications and underwriting processes and have more stringent eligibility requirements because they are backed by the government. Some types of SBA loans include:
- 7(a) loans are the most common type of SBA loans and can be used for everyday business expenses, such as working capital, inventory, expansion, debt refinance, and more.
- CDC/504 Loans can be used to finance fixed assets, such as buildings and equipment.
- Microloans are offered through nonprofit organizations and have lower maximum loan amounts (typically up to $50,000).
Qualifying for a Business Loan
When applying for a business loan, most lenders will look at certain qualifications. This includes your personal credit score, how long you’ve been in business and your ability to repay the loan. Additionally, you may be required to provide information about the business itself such as your income statement, balance sheet, cash flow statement and tax returns for the past three years.
It is also important to understand that lenders are assessing your overall risk before approving a loan. Factors such as repayment history and financial history come into play. The better your credit score, the less risky you appear to lenders and the easier it could be to get approved for a loan.
The Benefits of Securing a Business Loan
Securing a business loan offers a number of advantages, including:
- The ability to use borrowed money for specific investments or expansions in your business.
- The possibility of earning a return on the funds if investments succeed.
- A more secure financial footing if debt is being refinanced.
It’s important to note that any loan carries a certain amount of risk. Be sure to understand the terms of your loan and make sure you can repay it in a timely manner. Make sure you have contingencies in place if something unexpectedly happens, such as loss of income or changes in the market. Taking the time to properly evaluate your options ahead of time can save you time and money in the long run.
Getting the Right Business Loan for Your Needs
Now that you know what a business loan is and the types of loans that are available to you, it’s time to start researching the best option for your business. Comparing rates, terms, repayment periods and other factors of potential lenders can help you find the best loan for your unique situation. Keep in mind that lenders may all have different requirements, so make sure you read all the fine print before signing any paperwork.
Whether you’re looking for a mid-term loan or an SBA loan, taking the time to research the different options can help you get the most out of your business loan. With the right loan, you can ensure that your business has the capital and resources it needs to grow, flourish and remain competitive.