You’ve decided you need a quick injection of outside capital to continue the growth of your business, haven’t you? As long as you’ve done all of the right planning and miscellaneous due diligence, there’s a good chance a loan is actually exactly what you’re looking for. Not everyone has the benefit of angel investors willing to foot the bill, so the bank is their best bet. There’s more than one type of loan you can go for, all with their own intricacies that might be more suited for your business than the other. Here are some of the most commonly used loans in business:
This type of lending arrangement is what’s most typical whenever people think of a loan. An installment loan is given in one lump sum, and then paid off in installments over time. These types of loans have their fees in the form of interest rates, which is often a fixed percentage of your remaining balance each month the loan is on file. When you simply need money without any extra bells and whistles, the installment loan is your best friend.
Personal loans for business
If your business is still in its infancy, it might not have a strong credit profile of its own for you to borrow money against. With a personal loan for business, your personal credit score is used instead of your business credit score. Individuals with fantastic credit can take advantage of low interest rates and favorable loan conditions without having to take out smaller loans beforehand just to build credit.
Business line of credit
For businesses that need periodic injections of funds quickly and don’t want to go through an application process time and time again, a line of credit is a fantastic option to have. With a line of credit, you can withdraw money up to a certain limit whenever you’d like. This makes for a good cushion in volatile businesses, or to cover unexpected opportunities or expenses. These types of loans are more difficult to secure and sometimes come with not so great interest rates. That’s not to say they aren’t invaluable in their own right.
Any loan that’s less than $50,000 is considered a microloan and is normally just your average type of installment loan in practice. Microloans are seen as relatively low-risk for creditors, which typically means very favorable loan terms. These are excellent for building the credit profile of your business, so that you can work up to an eventual line of credit.
The financial world is complex and convoluted, so by no means is this list of possible loan options fully comprehensive. These are, however, the most commonly applicable loans sought out by small to medium-sized businesses, so they are worth understanding completely. Which loan will serve the long-term health of your business best is entirely dependent on your business itself. Make a sober appraisal of what kind of financial help you need and how big of a burden it will be before you pull the trigger, though. Loans can be a curse as much as they can be a blessing.