Choosing the right small businesses and the financing options are a lot like choosing the tastiest ice-cream flavor out of a handful—it’s overwhelming and confusing at best. That’s why it’s incredibly important to know what you want before dipping your toes into the tricky waters of small business loans.
First Things First, What Is A Small Business Loan?
The short answer: It’s a form of financing specifically offered to small businesses—meaning those with low sales volume and that are privately owned.
The long answer: When you’re just launching your business or you’re in expansion mode, it’s highly likely that you’ll need financing to support your business objectives. Many owners or solopreneurs turn the small business loans into a solution for the capital without any equity loss or stake in the company.
Now that you know a bit about this type of financing let’s delve deeper into the specifics.
3 Common Small Business Loans Are Available Today
Do you need the money to refinance a debt you took not too long ago? Or maybe you’re looking for flexible small businesses financing?
Whatever the reason, it’s crucial to remember that many types of business loans not only have a range of turnaround times, but they may also have restrictions on how the money is spent.
Option #1: SBA Loans
Simply put, an SBA loan is a small-term business loan that is partway ensured by the government (Small Business Administration). That facility eliminates a smaller risk for the financial institution which are issuing the loan.
As you’d imagine, SBA loans are pretty difficult to qualify for, but they come with some general requirements that can help you understand if your small businesses are in the running for the much sought-after source of funding. These include:
- 2+ years of business history under your belt
- $100,000 in annual revenue for your business
- A 640+ personal credit score for the business owner
Even if you fulfill these requirements, the chances of landing an SBA loan are pretty slim, as many different things can affect your loan eligibility. What’s more, you can only fund your small businesses with an SBA loan if you have three weeks to spare. Bureaucracy and paperwork can really slow down the process, and if your business needs quick cash, then an SBA loan isn’t really a feasible option.
Option #2: Term Loans
Small businesses term loans or period loans are what many people think of when they search for small business loan options. With a term loan, your business borrows money from an online lender, credit union, or traditional bank.
Then, you repay the funds over a fixed period of time (and often at a fixed interest rate). The terms and conditions of these loans vary, but a well-qualified business might be able to:
- Borrow up to $200,000 or more
- Secure an APR starting around 9%
- Use the funds for a variety of purposes—equipment buying, inventory, or working capital
Option #3: Cash Advance
Last but certainly not least, we have the small businesses cash advance.
In the simplest of terms, a cash advance is a short-term loan offered by your credit card issuer. When your take out a cash advance to finance your small business, you’re basically borrowing money against your card’s line of credit.
You can typically get a cash advance in a few different ways:
- At an ATM (you must have a PIN for your credit card to complete this)
- Convenience checks
That said, the cons of taking out a cash advance far outweigh the pros. Other than the fact the threshold amount is incredibly low, there’s the issue of high APR, costly additional fees, and the glaring possibility of having a dented credit score. As they say, quick fixes carry heavy consequences.
When you need financing to fuel the growth of your small businesses, you have plenty of loan options—the ones mentioned above are just the tip of the iceberg. So before hitting the APPLY NOW button, consider when to borrow, how much to borrow, and how fast you want to pay back the loan. They weren’t bluffing when they said fortune favors the bold. This is your chance to blow your business goals out of the back. This is your moment. Now, go!
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