When you are in the market for business financing, you can choose from several different options. There are three main types of business loans: accounts receivable loans, working capital loans, and business-only loans. An accounts receivable loan is financing extended to a business based on the value of its unpaid accounts. A working capital loan is a loan granted to a business based on the credit and assets of the business’s owner, and business-only loans are loans granted to a business based solely on the business’s assets and income.
Accounts Receivable Loan
An accounts receivable loan may be ideal for your business if you have a large quantity of unpaid accounts at any given time. This is most common among businesses that don’t require customers to pay their bills at the time they receive their product or service. Most lenders will not finance the entire value of your accounts receivable. Instead, they will offer you a loan equal to a certain percentage of the accounts. When your customers pay their bills, you will use the money to pay your lender.
Working Capital Loan
A working capital loan may be the right choice for your business if you aren’t afraid to pledge your personal assets as collateral. A working capital loan may be secured or unsecured. However, unsecured loans are available only to business owners with excellent credit and a sound plan for the business. Most working capital loans are secured using the business owner’s valuable possessions, such as homes and vehicles. If your business defaults on a working capital loan, you will be personally liable for the debt.
A business only loan may be the best option for your business if the business has a stellar credit score and a history of reliable cash flow. Business-only loans are usually available only to established businesses that can prove the stability of their income. Because a business-only loan is secured using only the assets and income of the business, you will not be personally liable for the debt if your business defaults.
To apply for funding for your small business, use the form on the right to begin the application process.