Cash is one of the most precious resources for a business. You can’t pay employees and keep things running with an empty bank account. And when a lack of cash is one of the most common reasons businesses fail, you can’t afford not to have options in bad situations.
However, many types of business loans are available if you need financing to keep things running. If you don’t know where to start, finding the correct type of funding for your business can be challenging. Below are four common business loans that are worth knowing.
1. Term Loan
A term loan is one of the most common business loans you’ll get as a business. It’s a general loan that you can use for almost any business purpose you can think of.
However, you’ll need to prove to your lender that you have a plan and can make payments on your loan. You’ll need to present this information to loan officers before considering your application.
However, you may not be able to get one with poor credit. If you do have bad credit, you’ll need the loan below.
2. SBA Loan
An SBA loan is very similar to regular term loans, but they’re more accepting to small business owners without excellent credit. They offer similar terms, which means they’re great for general purposes.
These loans are easier to get because the government backs them. The federal government wants to encourage new businesses to form, so it is willing to take on the risk of less qualified loan seekers.
Because of that, lenders are more willing to accept SBA loan applicants and give them a chance.
3. Line of Credit
Sometimes getting a business loan isn’t worth it. You don’t need the money right now, so you’re only putting cash in the bank and paying extra interest. Getting a loan doesn’t make sense when you don’t immediately need money.
That’s where a line of credit helps. This type of financing is available if you want a source of cash on demand. You then pay down your line of credit and pay interest only on what you borrow.
This means you won’t borrow a large amount of cash and will have a hefty monthly payment.
4. Invoice Financing
Do you have customers you send invoices to? In most cases, you won’t have problems when doing this. However, you’ll come across the occasional situation where a customer won’t pay on time and disrupt your cash flow.
That’s where invoice financing help. If you have overdue invoices, a lender will cover the amount you’re owed. You use the invoice as collateral and get a loan based on your expected invoice payment.
The biggest issue with invoice financing is the cost. These loans are more expensive, so you should only get them if necessary.
There Are Many More Types of Business Loans
The above types of business loans are some of the most commonly available, but they aren’t your only options. There are countless other loans available that depend on your needs and industry. Keep learning about every small business loan available to find the perfect financing for your company.
Check out the blog for more business financing tips that will help you keep your business operating.
