There are different types of commercial fundings. This is because different businesses seek different types of funds, small-term, quick funding, long term bulk amount, etc. it is solely dependent on the type of business and business requirement on which your business loans differ. Here are the most common types of business funding or loans available in the market.
SBA Loans
These loans are particularly guaranteed by Small Business Administration. Not only banks but even private lenders offer SBA loans. The purpose of the SBA loans decides the repayment tenure, like loans for working capital are available with a repayment period of 7 years, equipment SBA loans of 10 years, or real estate purchase loans could be up to 25. With SBA loans you can borrow up to $5 million. These loans are especially useful for enterprises looking to expand and are meant for strong credit borrowers since these are heavy loans.
Term Loans
Looking for fast funding and ready loan approval for a major amount, a term loan can be your pick. Easy to avail from online lenders, you can opt for an amount of up to $1million. However, when you seek a term loan, it might call for collateral (an asset such as a property or business) or a personal guarantee.
Business lines of credit
If you are seeking a rather flexible mode of funding, a business line of credit could be your option. This type of loan allows you to access funding up to your credit limit without any collateral. However, this type of loan is unsecured, and it can also involve processing and maintenance fee, which adds up to your returnable fund amount. However to fetch this kind of fund, you need to showcase strong credit and revenue, and if you can, it’s a pretty reliable way of accessing short-term needs of finance.
Invoice factoring
Many businesses are dependent on payments from customers. If your business has unpaid customer invoices, which are tentatively due for payment in 60 days, invoice factoring can be helpful for you. Its simply selling the invoices to a factoring company that pays you all the due amount for the time and collects the same from according customers as per the due timing of their invoices.
Therefore, while you get your money, the factoring company stays responsible for collecting the money. Hassle-free approval and fast funding make this a great deal for many businesses.
Invoice financing
Quite similar to that of invoice factoring, in this case, all you do is submit the invoices to the funding company as collateral for advance financing. However, you need to keep in mind that the financing company is not responsible for liquifying the invoices, so you need to take up the responsibility, by returning the funds.
Equipment/Auto loans
In the case of many businesses’ investment in equipment or automobiles for transportation and delivery of goods is essential, you can acquire equipment or auto loans, as per the valuation of the equipment or the automobile. The interest rates as well might vary as per the valuation of the equipment. While you own the equipment or automobile and you can use it for business to build equity, the bank or finance institute keeps it as collateral. Therefore, the terms of these kinds of loans are depended on the tentative life span of the equipment.
Fundings are something that is an inevitable part of life, while sometimes you need them on a small scale and at other times at a large scale. However, when you are seeking business loans, it is always wise to compare the rates, risks, terms, provisions, prepayment penalty, processing fee, details beforehand etc.. So, even if you are unable to do the research all alone, financial advisors or professionals can be of great help.
