The old adage is you need to spend money to make money. Small business owners understand this principle better than anyone, but when the cash isn’t ready on hand, you might find that you need to take out a business loan. In fact, according to Fundera, 43% of small businesses operating in the U.S. took out small business loans in 2022 alone. If you are a business owner considering taking out a loan, you need to understand that there are a lot of options to choose from. Picking the right small business loan will be crucial to your short-term and long-term success. Let’s look at five types of small business loans that you might want to consider.
This is one of the most common types of business loans used by smaller companies. This provides you with a lump sum of cash which you will repay over a fixed term of time. The payments will include interest as well as the principal balance. These types of loans can be used for many different types of business needs, giving you ultimate flexibility.
Small Business Administration (SBA) loans are an attractive choice because they are low-cost and backed by the federal government. Although this can be a cost-effective way to finance the needs of your business, you should be aware that the application process can be long and tedious.
Business Lines of Credit
A business line of credit is similar to a credit card in that you will not take a loan for a specific amount of money but rather have a specific maximum amount of money available for you to use. This type of loan option provides you with a lot of flexibility in that you can pay back the amount you have used and then withdraw more.
Equipment loans are similar to vehicle ones in that you will take out a loan for the purchase of the equipment and the equipment itself will become collateral. This type of loan can be used for machinery, vehicles, equipment, and even electronics.
Invoice Factoring/Invoice Financing
A common struggle for small businesses is trying to get payments on time from customers. This type of financing includes the practice of selling unpaid invoices to a lender and you are given the amount of money you are owed. When the payments do come in, the money will then go to the lender.
If you would like to learn more about a small business loan, please contact us today. Our team here at MCDC is here to assist you!