Do you wish to apply for a business loan? Then it is essential to know the different types of loans. Many people have ended up choosing the wrong loan categories for their business. Selecting a wrong loan can make your business collapse quickly. That is because the loan repayment terms will not favor your business. For instance, choosing a wrong loan can make you incur more costs and reduce the profit of your business. This article, we have researched for you some of the different types of loans that you need to know. Those loans are:
- The business line of credit
If your business has low credit ratings, choosing the business line of credit can be a great option. Here, your business can access the maximum loan amount at any time. The money lending company deposits a considerable amount of money on your business account, and once you pay the interest, you can draw more money. The business line of credit is known to charge very high penalties if you do not adhere to the agreed terms. They usually charge a very low-interest rate ranging from 7% to 25%, depending on the money lending firm. Some of the benefits of the business line of credit loan include
- Speedy approval
- Low-interest rates
- Good for business with low credibility
- Improved reliability among many businesses
- The equipment financing loan
Purchasing some equipment requires enormous investments. That is because the cost of the item itself is very high. Therefore some companies can buy the item for you and give that item in the form of a loan. You will need to repay for the equipment with the specified period. In most cases, the equipment financing loan has a maximum repayment period of five years. Therefore as a business, you will be required to pay for the equipment slowly while you are using the equipment. The interest rate here is meager. Companies with low loan credibility consider choosing this type of loan because of its flexibility. Below are some of the benefits associated with equipment financing. They include;
- Allows business with low credit score to enjoy loans
- The equipment can act as the collateral
- The loan application procedure is simple
- Business term loan
The business term loan is another type of loan that is mostly preferred by businesses. Unlike the other loans mentioned above, the business term loan requires one to have good business credibility. Therefore firms or people with low credibility are limited to this type of loan. That is because they will be given loans equal to their creditworthiness. The interest rates may vary from one lender to another. Get more Interesting details about small business loans on crestmontcapital.
In most cases, this type of loan requires one to pay within the agreed period without fail. Some of the benefits of this type of loan are such as;
- Different businesses can apply for this loan
- One knows the next repayment date
- One can access a higher loan amount
- Loan approval takes a short time.
- The SBA loans
SBA loans is another type of loan that entrepreneurs and other business people can apply. As the name suggests, the small business administration loan amount ranges between $5000 to $5 million depending on somefactors. The two types of the loan under the SBA loans are the general-purpose loans and the other loan that you can use to purchase things such as real estate property and others.
Some of the advantages of the SBA loans are such as;
- Has a very low interest
- Very minimal paperwork
- Longer repayment period
Some of the other types of loans that you need to know are such as the invoice factoring loan,Accounts receivable financing,Asset-based financing, and the merchant cash advance loan. Therefore by knowing the above-discussed loans, you will be able to choose the one that is perfect for you.