Popular Types of Business Loans for Small Businesses

Every business encounters major challenges in the cash flow at some point, which may necessitate borrowing of funds in order to sustain business operations. For startups, financial difficulties may come knocking at the door early on.

Fortunately, small businesses that find it difficult to finance all their projects have a number of avenues to turn to for support. Finding a lender is not as tedious as it used to be, and the choices are more numerous today. There are bank loans and merchant service providers. Some loan packages are offered by government agencies, which attract many borrowers since they come with guarantees other lenders cannot provide. Loans come in all forms and sizes, and some are tailor-fit to meet the specific needs of the lender. The availability of more than one option is an indicator that business owners must evaluate their needs first in order to ascertain that a specific type of loan is indeed the best recourse given their current situation.

Short-term Vs. Long-term

Two basic types of loans available to small business owners are long-term loans and short-term loans. Long-established commercial lenders usually offer long-term loans that have low interest rates. The amount of money is large enough to cover huge expense, such as additional capital needed in business acquisition and related activities. Small businesses looking for working capital can approach these lenders, and they usually get approval if they have a formidable business plan.

Meanwhile, short-term loans are usually issued by credit unions and banking institutions. Whereas a long-term loan must be paid on a monthly basis, short-term loans are paid at the end of the term of the agreement. The interest rate is usually higher compared to short-term loans. Retailer looking for additional funding for a short project that is expected to provide huge profits in a brief time period can benefit much from this type of loan.

Alternative options

Aside from conventional sources of funding, borrowers may opt to avail of alternative lending offers, such as those offered by online merchants. Applying for a business loan is now quite convenient since every step of the process can be conducted online. These offers are also quicker to process. It is possible to access capital without the difficulty posed by traditional procedures requiring mounds of paperwork. Alternative financing options work best for use in meeting the needs of an expansion, or sustaining operations when there are cash shortfalls.

Small businesses that are in the early stages of operation often find it difficult to meet stringent requirements. Alternative lending methods are relatively more flexible, including cash advances, crowd funding, and peer-to-peer loans, among others. For small businesses, it is often easier and faster to secure financing using alternative means. Many business owners opt for alternative financing methods especially when they have urgent need for the money. There are situations where the time frame is critical because availability of funds determine whether the company’s daily operations can continue or not.

It is not that difficult even for startups to get approval for a loan if they have a good credit score and a positive cash flow as well.

In case you're interested in knowing more info on roswell pressure washing, stop by www.mybluemonkey.org/residential-services/pressure-washing-roswell-ga/ Colorado Real Estate License Education

Various Types Of Loans Available For Business Startups

Getting financial help can be difficult for small businesses. So, loans are a great way out. Some of the loans are beneficial for startups whereas others are better suited for well-established companies.

There are various kinds of loans available these days, which we shall discuss below.

Bank Loans

For owners of small business who require a considerable amount of cash flow, bank loans are an excellent option because they usually have lower rates than any other type of financing. If any business owner is planning to avail loan from banks then they must provide complete financial information, a good business plan, and a guarantee. However, smaller local banks have easier underwriting for loans. When you are planning to take financial help from a bank, then you must take into consideration the processing time taken by banks.

Credit Cards

Many small businesses have been established with funding available from personal credit cards. This is because it is readily accessible cash, and moreover, personal credit cards are easier to get hold of than a business loan from a bank or elsewhere. This does not imply that it is the best choice for your startup or business.

When you are considering the merits of various types of loans you can avail, you need to think about interest rates which would apply. Credit cards naturally have a higher rate of interest than loans. What’s more, is making use of personal credit to support a business is dangerous. If at all the business you started fails, then you would be damaging all your credit and you will be left nothing much for your future.

Lines of Credit

Most of the banks which offer loans also offer lines of credit. The advantage of this type of funding for small business is its flexibility. It is good for additional cash flow when a particular business opportunity awaits you and you require funding. They can be easily availed in the form of credit card. By using a line of credit for various business expenses, you can keep track of the accounts used for business and for personal purchases.

Alternative Lending

You will find new players in the territory of lending funds for small business. They are called as alternative lenders. Alternative lenders provide loans to the owners in the type of quick and flexible funding.

Unlike banks alternative lenders use borrowed capital and make a broader range of advertisement like comments on social media sites, online reviews, and so on. This enables funding to be easily accessible, and most of the business owners will find out in no time if they are accepted. Borrowers usually pay a higher rate of interest in this type of funding. But, it is more advantageous for a business owner who is in need of quick cash.

So, if you are in need of funds to start your business, various types of loans can be what you can resort to.

Using Non-Bank Lenders to Fund Short-Term or Transitional Business Financing Needs

The Challenge: Traditional Bank Lenders usually don’t like funding businesses during periods of variable cash flow or unpredictable collateral – e.g., periods of very high business growth, or on the flip side, reduced operating performance.

The Solution: Non-Bank (Alternative) Lenders specializing in asset based lending or those that provide short term bridge loans can often look beyond the turbulence of a transitional period to fill a company’s funding needs until the business is able to return to a traditional lending relationship.

Key Considerations for Borrowers:

  • Cash is King: Focus on the cash availability and debt service of the alternative loan, not the interest rate
  • Do the Rewards Outweigh the Cost of Capital?: If the benefit of the taking on the new business is greater than the cost of the capital, high interest rates may be well worth it
  • Plan Your Exit: Develop a clear plan at the outset to move back to a bank from an alternative capital source

Bank Lenders don’t like lending money to businesses when cash flow and/or collateral is in flux, for example:

  • Example A: A business goes through a heavy growth spurt causing either a significant inventory buildup that requires additional working capital financing, or creating a period with uncertain future cash flows and perhaps inadequate collateral coverage depending on the cash conversion cycle; or
  • Example B: A business experiences a difficult operating period due to, for example, an operational restructuring, a sales force realignment or miscalculating the scope of a major project- creating negative cash flows or earnings

In such circumstance like these, a bank lender may reduce available funds (e.g., increase the reserve in a borrowing base or carve out specific collateral), ask for additional collateral or simply ask the company to find another lender.

Non-Bank Lenders are often willing to look beyond the turbulence of a transitional period to understand and structure around the real risks in order to get comfortable providing the necessary capital

Alternative lenders are structured to lend into periods of uncertainty – they usually have greater flexibility to tailor their loans to:

  • Provide additional growth capital during periods of rapid expansion, not penalizing a business for investing as may traditional lenders
  • Fund a business in the early stages of a demonstrated turnaround, much earlier than when a traditional lender would lend

Alternative lenders also provide more flexible terms (cash debt service, amortization, loan maturity, covenants) and cash availability than do traditional lenders, and for this they charge higher interest rates.

Key Considerations when Borrowing from a Non-Bank (Alternative) Lender:

Businesses turn to non-bank or alternative lenders when traditional lenders won’t provide the needed capital or bank terms are too restrictive. Here are several key considerations when evaluating an alternative loan:

  • Cash matters most so focus on required cash debt service (principal and interest), not the loan’s interest rate
  • Often the total debt service for an alternative loan at a higher interest rate will be lower than the total debt service of a traditional bank loan because of much lower principal payments
  • If the benefit of taking on the new business exceeds the cost of borrowing, high interest rates may be worth every penny
  • Have a realistic plan for moving back to a traditional lender before you take on a bridge loan
  • Make sure the loan will provide a cash cushion if the transition takes longer, or costs more, than expected
  • Ask yourself – does the lender understand my company and appreciate me as a customer? The answer should always be yes. If it’s not, find a lender that does

Best Business Loans Info: Why Online Lenders Are the Best Place to Search for Business Funding

The good news for modern day entrepreneurs and owners of non-traditional businesses is that traditional banks aren’t the only option for funding now. The best business loans for a particular company won’t necessarily be the best option for another company. There are many types of lenders offering financing for start-ups as well as larger, established businesses.

Regardless of your goals, you can skip a visit to the brick-and-mortar banks and loan offices. There are a variety of online lenders options available, including crowd funding solutions, merchant cash advances, equipment financing offers, online banks, credit card companies, and so forth. One of the biggest benefits of getting an online loan is speed. With algorithms, your application can be analyzed and processed in no time at all.

Even though there are so many options available, you don’t have to feel overwhelmed and confused. There are some ways you can identify the best business loans. Read reviews and take the time to acquaint yourself with the requirements that each company expects you to meet in order to qualify for a loan.

One thing to consider is your credit score. Like it or not, it plays a role in getting a business loan. If you have poor credit history, or none at all, it probably won’t be easy for you to get the best terms with your loan. It’s imperative that you get your finances straightened out and demonstrate that you absolutely WILL be able to make payments on the loan should you be approved for it. Provide proof of your cash flow and that you are expecting profits.

What to Check When Looking for the Best Business Loans

Almost all lenders – both online and alternative – will want to know how long your company has been in business for. The vast majority of them will expect you to have been in business for at least 5 years – the longer – the better. This doesn’t mean that there are absolutely no solutions for start-ups and newer businesses. Your requirements will probably be more rigorous and you’ll really have to demonstrate that you have a good, solid plan and product or service.

Also, keep in mind that the right kind of a loan for you will depend on the nature of your business. If you are involved in a seasonal business, then your sales volumes are not going to be consistent from month to month. Therefore, the best business loans for you will be ones that don’t have a fixed repayment schedule.

Where should you begin your search for the right kind of loan? One really good starting point for anyone looking for the best business loans is with US Business Fund. Whether you’re in need of easier ways to lease equipment to customers, a commercial lease for your company, or working capital, this site offers a fast, easy application process.

Easy Small Business Loans Overview: How to Prepare Your Business for an Online Loan Application

Loans for small businesses aren’t known to be very easy to get – especially for start-ups. Online lenders have made it a bit easier for owners of smaller companies to apply for financial funding. There are solutions for equipment financing, inventory purchasing, participation in vendor programs, expansion, real estate, and more. Whatever your needs, you can use the internet to find easy small business loans.

Look for a lender that doesn’t have a long, drawn-out application process. The SBA has that problem, making it difficult for those who are just starting out, or who don’t have very good credit. However, if you do have bad credit, you still might only qualify for a secured loan, even if you use an online lender.

Never apply for a loan without first carefully understanding the repayment terms and interest rate, no matter how easy it might be to get. You don’t want to get cheated out by having to pay a lot of extra money over time. How much time will you be given to repay the loan, and what is the frequency of the payments you will be expected to make over that period of time?

Be careful not to borrow more money than required. What if you miss a payment and the interest rate goes up? You might end up paying back more money than it would have cost in the first place to pay out of pocket or with a credit card. While it might not be possible to calculate the exact amount you’ll need, have a financial advisor help you with the estimate. Don’t have one? Some online lenders actually offer free tools to help you with the estimate.

Show a Plan for Easy Small Business Loans

If you are able show how exactly the money will be used, and that you have a plan in place for paying the money back, then you will be more likely to be approved. Some lenders of easy small business loans will look at more than just your credit score. It is only one part of the entire picture, so even if it is low, you still might qualify for a loan if you are able to put together a good, sound business plan.

If you are going to be applying for loans online, check the website’s security policy. Ann of the sensitive data should be transmitted via SSL encryption.

Now that you have a better grasp of what to expect with online easy small business loans, it’s time to start looking for a lender that meets all of the criteria. US Business Funding is the place to start. With its 24-hour funding process, easy application, 95% approval rate, and flexible term / payment options, you can’t go wrong with US Business Funding.