Business Loan Types

Business Loan

Today we will be discussing in detail the different business loan types. These types fall into two basic camps which are essentially those loans which are quick and easy to get but typically very expensive or those which have much further requirements but typically have lower interest rate and fees. By the end of today’s discussion you should have a clear understanding of which types fall into which camp and why.

Business cash advance: This type of business loan is very much akin to a personal cash advance in that the amount of money which you can borrow is based on your immediate financial strength. The lender will typically look at the last six months of your company’s revenue in determining how much if anything you are able to borrow. The idea here is that they want to structure the loan in such a way that you will be old to repay it in full within six months. This obviously implies that the amount which you can borrow is somewhat limited and it is also important to note that these have much higher than average interest rates. Consider this an emergency funding source only.

Merchant account loans: This type of loan is designed for retail businesses that run a large volume of credit card transactions. The reason for this is that repayment is structured around your daily credit card transactions. Once you have had the funds disbursed to you the lender will take over for your credit card processing function. The credit card processor account which you have is referred to as a merchant account, hence the name merchant account loan. The loan will be repaid as a fraction of each transaction until it is paid in full. As such there is no traditional interest rate.

Unsecured and secured business loans: to round out our list we must discuss how these two loan types function. These tend to be more large-scale loans for long term goals. They tend to be funded more by banks and traditional lending institutions and as such have much more stringent requirements upon them. The time it takes to get funded in this way typically is in the range of weeks instead of days and as such these are not appropriate for emergency circumstances. You will need to demonstrate your long term financial liability as well as show that you have a strong history of profitability.

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Business Loan Types was last modified: November 12th, 2013 by Amit Kraidman
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