Today we will quickly outline the business loan types; hopefully by the end of this reading you should have a clear understanding of the different general categories and their function. Use this information to help narrow down the field of offers depending on what your personal goals are.
Business Cash Advance: This is a quick and easy to obtain business loan type. They tend to be very expensive in terms of interest though, so only use them in emergencies and then only as a last resort. IT is typically a good idea to have credit or cash on hand to deal with emergencies instead, but if you haven’t done this and you need a relatively small amount of funding for the immediate future (next 7 days) this is a good option.
Unsecured Business Loan: This type of borrowing is not backed by any of your personal or business assets directly. It typically requires good business credit (or personal credit if you are guaranteeing the loan) and takes a bit longer to get approved. You will need to demonstrate a solid business history in most cases, and the amount you can borrow will be limited by the size of your company as well as your overall financial health.
SBA Loan: These can fall into many other categories, secured, unsecured, etc. but they all have one thing in common. They are all approved by the small business administration to meet certain guidelines governing the terms of the loan the interest charged, etc. If you don’t know where to start in obtaining financing this is a very good place to start. They have personnel available to walk you through every step of the way.
Traditional Loan: This is just another way of saying, “borrowing from a bank”. It doesn’t literally have to be a bank, but think large scale financial institution. Borrowing directly without using services like the SBA can be appropriate in some circumstances, the reasons for which do not fit within the scope of this article. You will need a strong business history, business credit, revenue to expense ratio and be well documented.
Business Line of Credit: To finish out our list of the business loan types we have the business line of credit. These function much more like credit cards than loans in that you are not immediately given funds upon approval. Instead you will have a rolling amount of credit available to you that you can use over and over, assuming that you are paying your payments on time and have some available.