Small Business Loan Types

Small Business Loan

Today we will be discussing the various small business loan types. These loans fall into a few basic categories. Essentially they are both fast and easy to obtain but expensive or they require further effort and have stricter requirements but are less expensive in terms of interest. There are also a number of loans which fit somewhere within these two categories.

As far as fast and easy to obtain but expensive the two major types are merchant account loans and cash advances. Merchant account loans are loans that are tied to your credit card processing account. This processing account is referred to as your merchant account and the term merchant account loan. Repayment is scheduled around a small fraction of each retail credit card transaction rather than monthly payments plus interest. They typically have the loan fee taken out at the time that it is dispersed in what is referred to as a discount rate. Discount rates are the difference between the amount of money which is owed and the amount of money which is dispersed to your company. Cash advances can work either with monthly interest rates or with discount rates the technique which is used differs from company to company. They are also very high interest and are fast and easy to obtain, but repayment is done through more traditional means such as monthly payments.

As far as loans that are harder to get but with lower interest there are a number of various categories. The most traditional loan type in this category is a bank financed secured loan. Bank financed secured loans are backed by some type of specific asset which the bank has legal recourse to reclaim in the event that you are not able to make your loan payments. They are backed by large financial institutions such as banks and typically require you to demonstrate good business credit history as well as a number of other factors. One of these factors is to show that you have a good revenue to expense income and that you will be likely to be able to make your monthly payments into the foreseeable future. Variations of this loan type include unsecured loans which can originate from traditional and nontraditional lenders as well as business lines of credit which work more like a credit card than a loan and can also originate from many different types of sources. The price you pay in terms of interest will be determined by and large by your businesses credit worthiness and the type of lender that you are dealing with.

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Small Business Loan Types was last modified: September 30th, 2011 by Amit Kraidman
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