To grow a business, it needs funding. And in as much as business owners want to grow their business without having to resort to external funding, it is just too difficult. The good news is that there are now lenders offering loans. Small and medium enterprises now have access to a wide range of lending options which include small business loans.
If you are a small business owner, it is very important that you know if you are eligible to apply for a certain type of loan. In that way, you know which is the best lending option. There are 3 types of small business loans available. First is the traditional loan that is offered by the bank. Other choices include microloans that come from nonprofit lending institutions and the last one, is the loan option offered by an online lender.
Most business owners turn to bank loans as they offer the best rates and terms. But before you can apply for a bank loan, you need to have an excellent credit score in order to qualify. If you have a good credit standing, you can avail the loan program offered by the United States Small Business Administration which is aimed at helping small and medium enterprises. The average loan size is about $370,000.
To qualify, you need to have the following:
Another way to get a loan is through microlenders. This is the most common option especially if your business is relatively small. They offer non-profit and short-term loans amounting to not more than $35,000. Microlenders compared to banks have a higher APR. If the business is having gaps in cash-flow, this is one of the most viable financing options. The only downside is that microlenders need business plans. They also require financial statements. If you are applying for one, you have to prepare the following documents:
For fast and easy business financing, many business owners opt for online lenders. They also offer short-term loans minus the documentation and long waiting time. Online lenders are not as strict as traditional banks. But the rates may be a bit higher compared to other lending options.
There are several types of online small business loans to choose from depending on your needs. These include the following:
The only downside of term loans is that it comes with a higher interest rate. But in terms of application, it is easy to qualify for this type of loan. In just a matter of days or weeks, you can have access to funds.
Online lenders have different set of requirements depending on the type of loan you want to apply for. You are required to fill up and submit an online application form along with the documents needed. How about your credit score? Online lenders are not as strict as banks when it comes to credit rating. Even with a poor credit score, you can still qualify for a loan application.
Although it is not technically considered to be a loan, this can be a good financing option for business owns. Some credit card companies offer certain incentives that makes it easy and fast to get the funding you need for your business. For instance, credit card companies may offer introductory APR and even reward programs. Depending on the nature of the business and your personal choice, you can weigh your options as to whether this is a good financing option.
As a business owner, you have the freedom to choose among the best small business loans depending on what you deem is the most viable option for your business. When you pay your loan on time and you continue building your business reputation along with your personal credit score, you get to have more financing options.