When running a small business, you will find that the need to gain funding from outside lending sources, is a circumstance that will arise at different stages throughout the life of your company. This is the case when you are in the beginning process of getting your business up and off the ground, as well as when you are looking to grow and expand your already established business. There are different ways in which you can borrow money, and different sources that lend you the finances that you need.
Is important to realize that we are making a distinction between a business loan and other types of funding including venture capital and business cash advances. Business cash advances are a type of fast funding which do not require much in the way of qualifying criteria that are also very expensive. When viewed through the filter of annual percentage rate they typically have rates ranging from 20 to 100%. As such they are not appropriate for long-term expenses. Business loans on the other hand are a good source of funding for your large-scale expenses such as the expansion of your company into new were or larger office space. Loans of this type will require up to 40 years to repay and as such you will need a low interest rate in order to do so.
The business loan is further categorized into two separate categories which are unsecured and secured. Secured loans are backed by some specific asset which the lender has the legal right to repossess in the event that you are not able to make your payments. Unsecured loans on the other hand are backed purely by your company’s credit worthiness and other factors relating to the likelihood that you will be able to repay the money which you have borrowed.
The business loan is a fundamental part of the business process and you should try to minimize the amount of interest that you pay. By having good credit and seeking long-term low interest loans through traditional lenders you will increase the likelihood of your company success. I recommend that you check your local resources such as the small business administration in your area for further information on obtaining funding of this type.