How to Choose Between Business Loan Options

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How to Choose Between Business Loan Options

Go through the business loan options available to choose the right loan for your business

Saturday April 25, 2020 9:55 AM, ummid.com News Network

Business Loan Options

With multiple options available for business loans in the market. If you are new into the world of financing, then you probably don't realize that there are many different types of loans. Many banks and financial institutions offer loans for businesses at attractive business loan interest rates.

They also provide a business loan EMI calculator that will give you an estimate of the loan amount that is to be paid every month. But before we dig into some tips and tricks to choose the right loan for your business, let's take a look at the business loan options available.

Small Business Administration loans

The following are the major types of Small Business Administration (SBA)

● Loan Program: These loans can be used for a variety of purposes, including purchasing real estate, acquiring or expanding or refinancing existing debt.
● Microloan Program: The SBA offers small loans in the form of microloans. These loans can be used for many of the same things a 7(a) loan can be used for; they just come in a smaller amount and shorter repayment terms.
● CDC/504 Loan Program: This program provides businesses a long-term fixed rate for major assets like real estate and equipment.
● Disaster loans: These loans can be used to purchase, repair, or replace assets that were destroyed as part of a declared disaster.

Traditional loans

Here are some different types of traditional loans available in the market.

● Equipment loan financing: With an equipment loan, you can purchase anything from tablets for
● Line of credit: If your business is more unpredictable and you don’t require cash every month, a line of credit is perfect. It just sits there until you need it, and you only have to take out the amount that you need.
● Working capital loan: A working capital loan is a short-term solution that enables you to temporarily infuse cash into your business while you find ways to bring in more revenue.
● Merchant cash advance: If you run a small business where you get lots of credit card transactions, a merchant cash advance can help keep money flowing.
● Invoice factoring: Invoice factoring is a unique way of increasing cash within your business by leveraging money that's already owed to your business.
● Business credit cards: In some cases, a simple business credit card can be used as a line of credit to fund business purchases.
● Secured loans: A secured business loan is very much a traditional loan in the sense that it's backed by an asset, such as a building, land, or equipment.
● Unsecured loans: An unsecured loan is the opposite of a secured loan in the sense.
● Term loans: A term loan is a very basic type of loan that operates much in the same way as a student loan or home mortgage.
● Personal loans: Personal loans are considered unsecured debt and are widely used for a variety of purposes including financing a business.

Choosing the right loan

The following factors will help to determine the type of business loan option you require.

How soon do you require the money?

If your company frequently works with businesses that need money right away to deal with all sorts of issues, from a broken refrigerator to a fire in the business next door. Then you will require a loan option where the process for disbursal is flexible and you can get access to quick funds. With a business line of credit, you can access funds faster than a traditional business term loan.

The future goals for your business

You need to consider the future goals of your business and think about the likelihood of the requirements for additional financing in the future. So, you need to make sure the lender you apply for a loan with has multiple product options to help grow your business. If your long-term goals involve large-sized investments, you might prefer to work with a company that offers multiple options for financing.

The business strong points

You need to consider your business's most unique strong points. Whether it is your business performance, business revenue, or your business credit score. Different business financing companies place different levels of value on strongpoints that you can explain to the company. With that in mind, you'll probably have better luck in getting the right business loan that considers your data points and customizes their repayment structures based on your business's cash flow.

When making the decision it is okay to take your time and analyze what works best for you and your business in the long term. You should never have to accept a loan that doesn't suit your business solely. Be patient and carefully evaluate all of your options before you make a final decision.

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