When you need a loan for your business, there are quite a few choices available–so many, in fact, that they can be confusing. To choose the right loan for you, you really need to have a clear picture of what you need. Some companies just need quick business loans to get them through a particular hardship, while others need a bigger long term loan to help them expand their business.
Business loans are basically divided into two types: short term business loans and long term business loans. Short term business loans generally come due in a year or less and they are perfect for seasonal businesses who need some extra cash to get them through the down season. Long term loans can usually be carried from one to seven years and are ideal for buying new equipment, building new facilities, or otherwise expanding the business.
There are several specific types of loans that could be either long term or short term business loans. Secured loans are simply loans that are backed by some sort of collateral, like a piece of property or equipment. Secured loans are common for businesses that don’t have a high enough credit rating to qualify for other loans. Secured business loans also a good choice for people who need quick business loans. Unsecured loans are loans that do not require collateral, but are harder to qualify for and often have a higher interest rate.
Small Business Administration or SBA loans are loans arranged through the government’s SBA for specific purposes, like disaster recovery. Lines of credit are loans that are not paid to the borrower all at once, but rather held in an account to be used as needed. This allows a borrower to take several quick business loans as needed rather than one big loan. Equipment financing for business works much like a car loan for an individual, with the business paying for a piece of equipment over time. Working capital loans provide a business with the cash they need to operate when revenues are down for any reason.