Settling for the right kind of funding for your business can be tricky unless you know the different parameters that will help you to come to a conclusion. According to a study that was conducted in 2017, it was revealed that 27% of the small sized business entities found it difficult to find a reliable source of funding. And one of the main reasons for this is that many are not aware of the different options that they can look into for funding their business.
Let us explore a few that you can turn to so that your business can receive the adequate funds.
Business loans- Types
Check out these different types of loans
Business line of credit
This loan requires you to pay only the interest part of the loan amount. However, you must not exceed the credit limit that you have been approved. This is a good option for your business if you are looking forward to accessing cash for buying inventory or meeting a sudden expense. They work just like credit cards and you have to make payments regularly so that the interest costs are affordable.
Being an unsecured loan, you do not have to provide any collateral as security. However, the loan amount that you can access in this type of a loan ranges between USD$1000 and USD$250,000. These loans are flexible and that is also an advantage you can enjoy.
Business term loan
These are term loans that are available for a period of one to five years. When it comes to repayment of these loans, you have to pay in a lump sum of capital and you are expected to make regular payments at an interest rate that is usually fixed.
The main reason for applying for this loan is to allow you to access cash that can help you to make purchases of a bigger amount. However, you are eligible for this type of a loan only if you have a good credit history and boast of good credit.
It is not going to be as easy as getting a signature loan and if you are wondering how to get a signature loan for funding your business, it is best to talk to the experts about factors like your eligibility conditions, mode of repayment, whether or not you require collateral, and term of the loan just to name a few factors that must be taken into account.
In fact, the important aspects mentioned above are the very points that will determine which type of business loan is best suited for you.
Working Capital Loan
If you are looking for money that will meet the daily business expenses for advertising, marketing campaigns, for purchasing inventory, and issues related to payroll, this is a better option. It is a short-term business loan to pay off debt or meet emergency costs. But you must have a good credit history. Also, there is a lot of paperwork to be done and it can sometimes take a long time before you can lay your hands on the proceeds of the loan. As far as the rate of interest is concerned, it is between 3% and 7% setting your credit score as a parameter.
Aside from the types of loans above, you will be able to apply for-
- Friends and family loan
- Merchant cash advance
- Small Business Administration or SBA Loan
- Receivable financing or Accounts receivable factoring
The loan amount you must apply for will depend on the size of your business, purpose of the loan, your financial stability and repayment capacity, credit history, strength of workforce, and most importantly how much profit you make from your business, which will determine your repayment ability.