By: LendVer Staff –
Finding the right loan for your small business can seem overwhelming since any online search shows tons of different financing types. However, there are actually only a few basic products that you need to consider when starting your journey. Here’s a breakdown of the main loan types and how to decide which one best suits your needs.
SBA Loans: The Supportive Option
Small Business Administration (SBA) loans are popular for their low interest rates and flexible terms. While the application process can be lengthy if you work with an inexperienced SBA source, it can actually go fairly quickly and smoothly if you connect with a seasoned SBA lender. These loans are usually available from $25,000 to $5,000,000+ and are ideal for a variety of purposes.
Individuals with industry-specific experience and who have strong credit can access an SBA startup loan to launch a business, or established businesses needing a larger, long-term loan for expansion or big purchases are good candidates as well. If you have a credit score of less than 650, accessing SBA financing may be difficult.
Term Loans: Quick Access for Major Investments
Business term loans provide a lump sum amount of capital and usually have a fixed repayment period that typically ranges from 1 to 10 years. These loans are great for businesses seeking a defined amount for specific purchases, like new equipment, inventory, or working capital.
There are myriad conforming and alternative business term financing lenders, and low credit is usually not a barrier to access capital although your terms may be pricier and the length of the available financing shorter. Lenders focusing on term financing usually have faster, more streamlined processes, and employ a simple online application and borrowing process.
Lines of Credit: Flexibility for Cash Flow Needs
For businesses needing flexibility, lines of credit are invaluable. They allow you to borrow as needed, making them a smart choice for managing cash flow or covering seasonal expenses. Additionally, you can pay down your credit line without incurring a penalty, and borrow funds again and again.
In this way, a business credit line operates similarly to a credit card, however the amount of financing you can access is usually greater. There are many business credit line lenders, and business owners with low to high credit should have a variety of options to choose from.
Conclusion
Choosing the right loan depends on your business stage, goals, experience, personal credit score, and revenue (among other factors). By aligning your needs with the right financing type, you can set your business up for financial stability and growth. Make sure you take your time evaluating lenders and loan products, do your research, never pay upfront fees, and read reviews so that you can Borrow Confidently™.
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