Small business loans are often a very important type of financing option for new and growing businesses. Small business funding refers to a means by which a current or aspiring business owner obtain money to launch a new or existing business, buy an already existing small business, or attract capital to finance future or existing business operation. There are many types of small business funding options that may be available to an individual or business owner seeking additional funds for start up, expansion, equipment, or other reasons.
Invoice Financing: Small business owners are very familiar with invoice financing. This is the most traditional form of small business funding. Commercial lenders offer this cash option either as a fixed rate loan or an installment financing program. In an installment financing program, cash is wired in along with monthly payments for a designated amount of time. After the required number of payments have been made, the total cost of the equipment is repaid in full.
There are many commercial lenders that offer this option. Lenders offer financing to small businesses based on a number of factors including credit history, potential growth, revenue expectations, and level of competition in the targeted market. Commercial lenders also offer different loan amounts and terms to suit different business needs and requirements. A commercial lender will consider factors like business needs, duration of time, amount of capital needed, and debt to equity ratio of the company. To obtain a quote on a small business loan, business owners are advised to shop around among multiple lenders to get the best rate and terms.
Bad Credit Lenders: One of the most common ways to obtain financing for start up or expanding businesses is to work with non-traditional lenders, or “bad credit” lenders. These lenders do not require a credit check. They offer cash advances with no credit check. These lenders will approve applications with a personal guarantee from the business owners. Although bad credit business loan products can be a viable option, they are more likely to be used by established or highly ranked companies.
Personal Loans: Personal loans, also called unsecured loans, are another common source of small business loan products. Unlike commercial loans, personal assets do not need to be pledged as collateral. However, these loans carry high interest rates and come with much higher loan amounts. The interest rates are based on the credit score of the borrower, as well as on the risk of lending money to those with poor credit histories. Some of these loans may also require collateral to be put up, such as the use of a vehicle or personal belongings.
Small Business Grants: There are also a variety of federal and state programs that offer small business loans financing options. Typically, these programs are based on a business owner’s credit score, as well as on income and assets. To qualify, borrowers will often have to demonstrate a financial need for the funds, as well as a history of paying off their prior debts. These programs are often awarded through the Small Business Administration. Before applying, it is a good idea to contact your local SBA office to get more information.
Private Lender Options: As mentioned above, there are a variety of private lenders that offer small business loans financing options. The most popular online lender is Capital Bank, which has been in business since 1979. For the benefit of the borrower, Capital Bank limits the amount it will lend to any one borrower, but it offers competitive rates and flexible terms. Another potential lender is Prosper, which does not charge application fees. Its lending is based on your credit score, so if you have a good one, you should have no problems qualifying for the loan. Although Prosper does not do business in your local area, you may still qualify for its services through other private lenders.
Private Commercial Lenders: A growing number of commercial banks, credit unions, and mortgage companies are providing small business loan programs to local businesses. Some of these lenders have loan amounts that may fit your particular business needs. Keep in mind that interest rates for these types of loans are higher than the rates offered by traditional lenders. Still, many of these companies offer attractive terms, including term loan amounts that can range from fifteen to thirty years. When comparing small business loan quotes, be sure to compare all the small business loan options that you are considering.
