Are you looking for a business loan to improve or grow your business?
If so, you need to learn about the different kinds of business loans available to you. Most business loans are available directly through banks, credit unions and online lenders. The rates, interest rates, loan terms and limits vary according to each type of loan. Therefore, it is essential to know exactly how each loan functions, in order to select the most appropriate option for your business.
In general, small business loans are available to start-ups that have no collateral, poor credit or are illiquid. This type of financing requires a lengthy application process. In fact, most lenders would not want to lend money unless the application process is extremely detailed and time-consuming. Since the application process can be lengthy, it is important to only choose lenders that can give you the best terms and lowest interest rate. By comparing lenders and their terms and conditions, you can determine which one is able to provide you with the most reasonable terms.
Collateral can come in the form of home equity
Since the amount of money you can borrow is limited by the amount of equity capital you have available on your business property, you will also need to have some collateral – either property or personal possessions. If you do not have collateral, you will need to provide the lender with a personal guarantee. A personal guarantee allows the lender to obtain your business without the hassle of securing the required collateral. Collateral can come in the form of home equity or auto or other similar assets. In addition, if you have business properties that are valued at less than $5 million, you will automatically become a secured creditor (this can still be done even with a bad credit history). There are many business finance companies that are willing to work with small businesses even with bad credit.
Another option for unsecured business financing is to apply for a bank loan. The most popular type of bank loan available to business owners is a business line of credit, which gives you a loan based on the equity value of your business properties. Although this is the most traditional type of bank loan, it does not require any collateral as it is backed by the value of the borrower’s property. A commercial mortgage loan is a popular choice for unsecured financing as well since it allows you to access funds at relatively low interest rates and longer repayment terms. However, it is worth noting that this type of financing is more expensive than a bank loan and usually requires a high down payment.
Small business owners can get pre-approval from a bank
There are also commercial investment loans and merchant cash advances available from many banks and lending institutions. These types of business loans require collateral – such as a personal guarantee or business property – to obtain funding. Commercial real estate loans are another popular option that can be used for short-term cash needs. These loans are often used to fund the start-up costs of a new business, and are generally based upon the value of the property being financed. In order to get a business loan, you will probably need to have a decent credit score and a business plan that details how you intend to use the money and when you plan to pay it back.
Although it is easy to find financing, it can be difficult to tell whether you will qualify for any given loan. If you want to apply for a business loan and are concerned that you may not be approved, there are several sources that can help you determine if you will be eligible or not. Small business owners can get pre-approval from a bank, but qualifying for a loan through a bank may require you to have a decent credit score and a great business plan that explain how you intend to use the funds. Non-bank financing is easier to qualify for, but it still may take some research before you find the financing that is right for you.