What type of funding you get for your small business is largely dependent on the circumstances under which you are borrowing, and your goal in borrowing. There are some loans which are very fast to obtain, but tend to be expensive. Others require an extensive approval process, and will typically have much lower rates. You can also borrow money in the form of a credit line, which works more like a credit card than a loan. We will be discussing the different types of small business loans.
First for a quick definition of what makes small business loans different from those offered to larger companies. There are some generally accepted guidelines for business lending. Certain metrics such as yearly revenue and time in business are important to the acceptance process. Loans for a small company are designed with the understanding in mind that you will not meet these requirements. They typically have less stringent revenue requirements and do not require that you be in business for 10 years as is common.
If your company needs emergency funding you may want to get a business cash advance or merchant account loan. Both of these options are very fast to obtain, requiring very little in the way of approval, but are also both very expensive. Ideally you will have emergency funds available on hand to avoid paying these high rates, or you can have a rolling line of credit with available funds to pay for emergencies as well.
A line of credit can be a great tool for day to day expense fluctuations and also for emergencies. A line of credit works different than most loans in that you have an amount made available but not given to you at the time of acceptance. If you notice that your daily expenses often surge above your current intake (because of delayed customer payments and the like) a line of credit is probably a good option.
Finally, there are secured loans from traditional lenders. These can be backed by equipment, property, etc. They typically have stricter requirements, with the consideration for your business size mentioned above, and will take longer to get approved and disbursed. These are definitely your best option however if you are trying to pay for a large item over a number of years.
There are three basic types of small business loans. Fast loans, such as advances and merchant account loans, rolling lines of credit, and secured long term loans for major purchases.