What Type of Business Loan Do I Need?
Whether you’re looking to purchase new equipment or new real estate, there’s a type of business loan for you.
When it comes to securing finances for your business, it helps to understand the various types of business loans available. Each type serves a different purpose and caters to specific financial needs. Here we’ll cover seven common types of business loans, as well as loans specifically for small business owners and how business credit cards can be part of your funding plan.
7 Types of Business Loans
- Term loans
- Working capital lines of credit
- Inventory and account receivable financing
- Equipment loans
- Construction and development loans
- Commercial real estate mortgages
- Business vehicle loans
Whether you’re looking to purchase new equipment or new real estate, there’s a type of business loan for you. Qualification requirements, loan purpose and loan terms can all influence what type of business loan may be best for you. Let’s look at your funding options.
Term loans
Term loans are a popular choice for many businesses. They provide a lump sum of capital upfront, which is repaid over a fixed term with regular payments. These loans are often used for business expansion, purchasing equipment, or covering large expenses.
Working capital lines of credit
A working capital line of credit is a flexible financing option that provides access to funds as needed. It's useful for covering day-to-day operating expenses, managing cash flow fluctuations, and taking advantage of unexpected opportunities.
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Inventory and account receivable financing
If you have inventory or outstanding invoices, inventory and accounts receivable financing can be beneficial. Lenders provide funds based on the value of your inventory or outstanding invoices, allowing you to access capital quickly.
Equipment loans
When you need to acquire new machinery, technology, or equipment, equipment loans can help. These loans are secured by the equipment itself, making them a cost-effective way to finance essential assets for running your business.
Construction and development loans
If you're in the construction or real estate development industry, these loans can finance the construction or renovation of commercial properties. They're typically short-term loans with the property as collateral.
Commercial real estate mortgages
Commercial real estate mortgages are long-term loans used to purchase or refinance commercial properties. They offer lower interest rates and extended repayment terms, making them suitable for real estate investments.
Business vehicle loans
When your business needs vehicles for transportation or delivery, business vehicle loans provide financing to purchase or lease them. These loans often come with favorable terms and competitive interest rates.
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Business Loan Options for Small Business Owners
Still have questions? Here are some of the most common questions when it comes to setting up your savings goals.
- SBA 7(a)
- SBA 504
- Startup Business Loan
Small business owners have unique financing needs, and there are specialized loan programs designed to address these requirements. Small Business Administration (SBA) loans can help business owners get funding when they may have limited collateral or credit history.
SBA 7(a)
The Small Business Administration (SBA) offers the 7(a) loan program, which is one of the most versatile options for small businesses. It can be used for various purposes, including working capital, equipment purchase, and debt refinancing. SBA loans typically have competitive interest rates and longer repayment terms.
SBA 504 loan
SBA 504 loans are specifically designed to help businesses acquire fixed assets like real estate and equipment. These loans feature low down payments and long repayment periods, making them an appealing choice for small business owners looking to invest in tangible assets.
Startup business loans
Starting a new business can be challenging, especially when it comes to securing financing. Some lenders specialize in startup business loans, which are tailored to meet the unique needs of new businesses. These loans often consider your personal credit and business plan rather than a lengthy business history.
Dream big, borrow smart.
Business Credit Cards
In addition to traditional loans, business credit cards offer another way to access capital. They provide a revolving line of credit that you can use for various expenses, including purchasing supplies, covering travel costs, and managing everyday purchases. Business credit cards often come with rewards programs and introductory 0% APR offers.
If you’re new in your business and having trouble getting approved for a loan, a business credit card can help you make some of the initial purchases you may need to get your business up and running. Using a business credit card responsibly is also a great way to start building your business credit score and history, so you’ll be more likely to get approved for a business loan down the road.
Key Takeaways
- Small Business Administration (SBA) loans can help business owners get funding when they may have limited collateral or credit history.
- Business owners can use revolving credit with a business credit card or business line of credit.
- Qualification requirements, loan purpose and loan terms can all influence what type of business loan may be best for you.
Selecting the right type of business loan is a critical decision for any business owner. To make an informed choice, consider your specific financial needs, your business's creditworthiness, and the purpose of the loan. Research and compare lenders to find the terms and rates that best suit your business's requirements. Whether you're looking for a term loan to expand your operations or an SBA loan to jumpstart your startup, there's a financing option tailored to your needs.
APR = Annual Percentage Rate
