If you are new business owner you’re no doubt looking to find funding for your new company. There are many ways to do this to include borrow money from friends and family or seeking out venture capital. Although these are both viable options for the scope of today’s discussion we will be discussing business loans and their various forms. But in the today’s reading you should have an understanding of the general categories of these loans and their primary purposes.
Business loans come in two basic categories. First, there are loans that are considered to be fast sources of funding. These include things such as business cash advances and merchant account loans. Business cash advances work very much like personal cash advances in that the amount of funding which you can obtain is based on your immediate revenue more than any type of long-term view of your financial liability. Typically the cash advance lender will look at your last six months of revenue in determining how much money they should extend to you. The goal here is to live in you as much money as you can afford to pay back over the next six months. These loans tend to have much higher than average interest rates and as such you should use them for emergency purposes only. Merchant account lending works very much the same way in that there is a high discount rate applied at the time that you obtain the loan and you are expected to repay it within 3 to 6 months depending on your agreement.
The other primary type of business loans are loans that are more long-term and designed for larger scale business needs. These loans are typically funded by banks and other traditional funding institutions and they are more difficult to obtain. You will be required to demonstrate your long-term business viability by showing that you have a strong history and that you have a solid plan for the future. Whereas funding for fast loans may take as little as 72 hours funding for loans of this type usually takes several weeks and requires further documentation. However if you are making a large scale investment this is really your only viable option.
These are the two primary types of business loans. The first is loans that are designed for quick or emergency needs and not for long-term investment. The second which is cheaper and harder to obtain is more geared towards large-scale goals.
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