What Are The Different Business Loan Types?

Business Loan

If you are looking to get a business loan in the near future there are a few options you have. Each option has some advantages and disadvantages depending on your individual needs and circumstances. There are basically two categories of loans; those that are fast and easy to get but expensive, and those that are much more difficult and slow but cheap. We will break down these categories into more details on today’s article.

First let us discuss some of the fast ways of funding your company. This includes things like business cash advances and merchant account lenders. Both of these options are typically very expensive and you should really only pay for your business expenses in this way under emergency circumstances. If for example a natural disaster has damaged a critical location or piece of equipment and this has stopped business operations, this may be a good way to fund the repairs. So how do these work? First, a business cash advance works in much was a personal advance does. The company will look at a short term snapshot of your monthly revenue and expenses, usually 6 months or less, and based on this make available an amount of money they feel you should be able to pay off in 6 months or less. None of the usual criteria or large scale checking is required for this, and as such the loans are very expensive to help offset the additional risk. Merchant account loans work in a similar fashion. They lend you a set amount minus a discount rate (so if you borrow $3,000 they may only disburse $2,700) and then you repay them through your credit card transactions. There is no traditional interest rate applied to this kind of loan.

Now let’s look at the other side of the spectrum. If you have a major business expense, like the purchase of new equipment or new property, then you will most likely want a more traditional loan from a bank or other such institution. Common requirements for loans of this type include a long financial history, accounting reports, a good business credit score and solid financial future. Because of the additional requirements, these can take much longer to fund. Whereas the fast loans described above can be funding in as little as 72 hours, a bank may take several weeks to disburse funds to you.

The choice you decide to make depends on your circumstances and on what you qualify for.

For more information, go to business loan at http://www.unsecuredbizloan.com/business-loans/about-business-loans

What Are The Different Business Loan Types? was last modified: November 12th, 2013 by Amit Kraidman
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