Small-business loans are instrumental to your business success as a business owner for whatever your business needs are. Currently, with online lending, you now have access to many funding options apart from traditional banks that before now was the only source of business financing. You have options of choice ranging from SBA loans and business lines of credit to term loans and invoice-based financing.
Online lenders help business owners simplify their loan application process and approve more small businesses. Most online lenders also offer competitive rates and offer faster funding than most banks do.
Small business loans are issued only for businesses that have a year or more of history and revenue. Now, there are several financing options open for entrepreneurs who qualify. There are U.S. Small Business Administration loans, term loans, business lines of credit and invoice factoring.
Different Types of Loans for Established Small Businesses
Business Term Loan
Amongst the various types of loans offered by online lenders is the term loans of up to $500,000. For a short term loan, the repayment period ranges from 6-12 months, while a long-term loan repayment, on the other hand, can extend up to 10 years or longer in some cases.
Business Line of Credit
A business line of credit, offers access to flexible cash, and lenders offer you access to a specific amount of credit, but won’t prompt you for payments and you won’t get charged until you tap into the funds.
- Credit line range: $2,000 – $250,000
- APR range: 8% – 99%
- Ideal for managing cash flow, handling unexpected expenses and financing short-term business needs.
This is a government-guaranteed loan program that works with banks to offer low-interest rates as well as long-term repayment. Be it as it may, the process is time-consuming, and the requirements are a tad bit strict. It only accepts a credit score of 690 or higher, even though some SBA lenders may have lower score requirements. It is an ideal option that strong businesses who need business financing and have the flexibility to wait for, funding should apply for.
- Loan amounts: $30,000 – $5 million
- Approximate APR range: 6% – 11%
- Ideal for large one-time and longer-term investments, purchasing real estate or equipment, buying existing businesses and refinancing debt.
Other Funding Options
Other business financing options apart from other traditional loans or lines of credit includes personal loans for business or business credit cards. For those who have a young business, who may not qualify for traditional financing, a personal loan would be a good option. Personal-loan providers will look at your credit score and income rather than at your business history.
A business credit card provides revolving credit, which makes it a solid option for short-term expenses, and can also be easier to qualify for a business credit card than a small-business loan. Even though credit limits tend to be smaller than a line of credit, a business credit card may offer rewards, like cash back or travel points.
How to Get a Business Loan
It is different strokes for different folks when it comes to what every lender wants before giving you a loan. But basically, most of them consider similar factors, including personal credit score, your time in business and annual revenue. Lenders will also consider your cash flow as well as the ability to repay the debt.
Depending on the lender, you may be asked to share financial documents like tax returns, and bank and cash-flow statements.
Additional Steps to Qualify for a Small-Business Loan
Strong personal credit can help you qualify for lower rates and give you more financing options. But if you do not need business financing immediately, you should consider building your credit score first before applying.