Starting a new business is not an easy task
and expanding a startup business is more difficult. If you want to expand your
startup then it is mandatory that you will have to go through cash flow. In
this condition getting small business loans is a better option than any other.
There are different kinds of business loans available in the market to support
your startup and its enlargement.
Along
with different loan options, there are multiple kinds of lending organizations
that you can choose to get your loan from. These organizations include banks,
traditional lenders and online lending platforms like BitXfunding. All these
platforms are offering different types of loans to choose from and we are going
to discuss all these types in this article.
There
are a total of 6 main types of small business loans that you can apply for to
aid your startups. All these loans will help you get quick financing if you
want to expand your business. All these types have their own pros and cons that
are mentioned below.
Types of Loans
Small
business administration (SBA) is one of the best organizations that partially
back up the loan that starts from 5000$ to 5 Million dollars. These loans are
provided by the different banks and online lenders but still have the guarantee
of SBA. The best thing about SBA loans is that they are backed by Government
which helps borrowers to get them at low APR rates due to lenders’ confidence
that there is a greater chance that they will get their money back. These loans
fall under the category of secured loan which means that you guys have to put
some collateral in exchange for the loan. This will be a security to the
lender. These loans can be used to back up any kind of business purpose with
low APR rates and long payment time duration.
The application process is a little long because first you have to get approved by
the government and then you can apply for these jobs. There are two major types
of SBA loans.
Microloans
Microloans
are the one that lends you up to 50,000 $ to your startup business.
SBA 7(a)
This
loan covers the different purposes that are connected to your business like
CDC\504 loans. These loans are used to purchase major assets like land for the
business or new equipment.
|
Pros
|
Cons
|
|
Low-interest rates
|
Long application process time
|
|
Long repayment duration
|
Need strong credit History
|
|
No need for the long business qualification
|
|
This
is a traditional business loan with the help of which you guys can get a big
lump of the money that can be between the range of 1000$ to 500,000$. This also
gives you a long term to repay your loan and it can be up to your decision that
you want to repay them between 1 to 5 years. It is also up to the choice of
lenders that they want to get repaid in short terms or long terms.
The
interest average for these loans can vary between 7 to 30%, which also depends
upon the nature of the lenders. These loan terms don’t
need any collateral to put. The amount of money that you can get in this loan
mostly depends upon your credit score, monthly revenue and financial health of
your business.
|
Pros
|
Cons
|
|
Can be used for any purpose of your business
|
Yearly repayments charges
|
|
Predictable repayments
|
Need a good credit score
|
A business line of credit extension is
practically identical to a credit card, however, it's available to
organizations with lower FICO assessments. You'll be endorsed for the greatest
amount of credit which you can draw at whatever point you need. Normal APR
rates are 7% to 25%, and reimbursement terms are as a rule between a half-year
and 1 year, yet accurate terms change which depends upon your business' income
and FICO assessment.
|
Pros
|
Cons
|
|
Fast Approval
|
High penalties on missed payments
|
|
Low APR rates
|
Needs to provide some collateral.
|
4. Factoring
If you are going through a tough time and need some cash in Bulk
then Factoring is a good idea. Companies consider factoring when they need lots
of cash upfront to invest or buy new machinery for the business. This method is
very helpful for giving a boost to your financial condition. Factoring is a
finance procedure in which a company sells its goods on a discount to gather
more revenue in less time. It is a very expensive way but you can generate lots
of funds through it. Factoring, if you pay 2% money to get one month advance it
will be equal to 24 percent of your annual interest rate. This will also
create a bad image of your company in the market but still, you can design a
better strategy through which you can utilize the method of factoring and also
don’t lose your reputation in the market.
|
Pros
|
Cons
|
|
Fast Approval time
|
Early charges on repayments are high
|
|
Easy Eligibility
|
|
Merchant loans give you a single amount in return for a set level
of your daily sales exchanges. Rather than ordinary APR rates, it duplicates
your advance amount by a factor rate, it can be up to more interest than the
actual amount you owe. The APR starts at 15% yet can go into triple digits. Normal
repayment terms last 8 or 9 months, however, can be as low as 4 months or up to
18. Merchant loans are reasonable for organizations with poor credit. The
endorsement is quick – inside a day or 2–and you can get a loan up to
$250,000.
|
Pros
|
Cons
|
|
Can be obtained at a low credit
|
Interest rates are high
|
|
Approval time is Fast
|
6. Look for an angel
investor
Angel investors are some of the best people to attract when you
want to gather quick funds for your company as well as get some experienced
person on the board. In this option, you will convince an experienced
businessman to give you funds as well as become a guide to help you succeed in
your business. These angel investors have a very good eye so never try to fool
them with big ideas and lies. Your business strategy should be composed and
don’t have any loophole in it to attract an angel investor.
|
Pros
|
Cons
|
|
Can be obtained at a low credit history
|
Interest rates are moderate
|
|
Can load off steam on to you
|
Comments
Post a Comment