Competing in the corporate sector is hard. With time, things have become even more challenging considering the plethora of avenues on which businesses compete these days. With speculations suggesting that over 190 million businesses are operating across the globe, there is no doubt that competition over the years has risen for most industries. Likewise, we find that many small businesses often need to make thoughtful decisions early on that can affect them not only in their short term progress but also their overall growth in the long term. According to the statistics collected by the US Bureau of Labor, 20% of businesses fail in their first year, around 30% in the second year, 50% after five years, and almost 70% businesses fall in their tenth year. This is quite an alarming picture, and that is why, at times, there is simply no other way for businesses to survive but to take viable risks. One of those risks involves taking a business loan that can offer a venture to sustain its profitability and continue their day to day operations. Mentioned below are some of the best business loans that can help you accomplish your objectives:
Business Line of Credit
If you want reasonable access to cash and flexible terms for repaying the funds that were lent to you, then nothing is better than acquiring a business line of credit. Not only do they offer you an unsecured line of credit with no collateral involved, but a line of credit can also be an ideal solution during the time where you want to chase after growth or traverse through dry spells with uneven cash flow. For small businesses, a line of credit offers them short-term access to funding. These can be readily used to finance your day to day business expenses such as maintenance of operations and making payments for supplies, offering your workers their payroll, or simply increasing your inventory. A line of credit works similarly to a business credit card. However, there is no lump-sum amount that you need to pay during the process of opening your account; neither are there any perquisites involved in making monthly payments. Your ability to acquire a business line of credit does, however, depend on your credit and thus has to be reviewed by the lender. The moment you start to draw out funds, you will begin to accumulate interests. The line of credit does, however, come with a cap that limits the amount that you may borrow.
This type of loan is considered specifically by those businesses that want to acquire new equipment for their workers and the workplace. Equipment can range from computing devices to office desks as well as heavy machinery. By using equipment financing, you can acquire all of this equipment that your business urgently needs without paying the full brunt of the price upfront. To understand how this works, you need to realize that the equipment for your office is categorized as hard assets for any venture. From a company car to an oven for a restaurant, both are considered as hard assets. Hence what can be categorized as a hard asset for a company has a lot of room for diversity and variations. Therefore equipment financing, in short, can only be used for raising funds to acquire a ‘physical asset’, something which is tangible and withholds considerable worth. However, if, by any chance, you default in making your due payments, the lender has the power to obtain that asset and get complete ownership. This makes equipment financing as one of the best options since it is not only cost-effective but also poses a much lower risk for both parties.
When it comes to small businesses who may find acquiring a substantial loan to finance their immediate needs, SBA offers them a relatively easy way out. The US Small Business Administration is a government agency that provides tremendous support for entrepreneurs.
Although the agency doesn’t directly finance small business owners, it offers you partnerships when it comes to lending the desired amount that you would like to borrow. Essentially SBA steps in and reduces the risk involved for the lenders to offer you the capital and thus make it easier for you to access these types of loans. Many of these loans also come with consistent support that can help you run and start a new business. Furthermore, SBA loans offer you a guarantee of generally lower rates and fees as compared to non-warranted loans. Lastly, SBA loans have lower down payments, some loans do not even require collateral at times, and they may also include flexible overhead requirements.
Many small businesses often fail to get loans from banks since they pose a considerable risk as borrowers. However, after getting their SBA loan worked out, they can improve their standings with banks later on and have a favorable approach from them.
Another type of loan that is considered ideal for businesses looking forward to investing to meet their business areas or their current need for working capital is known as Term Loans. These loans can be either secured or non-secured, where the latter has no collateral attached to them if a company defaults. Term loans are less risky when taking the lender’s point of view and a cheap source of generating funds from the borrower’s point of view. The traditional term loan requires paying back the money according to a specific repayment schedule, which includes interest payments.
You can ask banks, online lenders, and other financers for a term loan. The major benefit of asking for a term loan is that you do not have to wait for financing if you have a strong credit history. Bank term loans are the most affordable; however, they require more time to be accepted. On the other hand, if your credit history is poor, then you should probably consider acquiring short-term loans. The best use for such type of loans includes:
- Planning for long term expansion of business
- Reinventing your commercial space
- Investing in real estate
- Or acquiring another business
The Final Word
In case you have been struggling with your growing business, it is imperative to seek the business loans mentioned above. This so that your business can acquire to meet demands for its further growth.