Getting a business loan can be a trying experience if you are unaware of your options. There are seven basic ways to get financing for your company. It may come as a surprise, but Investopedia has found that to get the best deals you are better off going to an online lender, rather than to a local bank. The ease and availability of online lenders continue to grow, each of them offering the business owner straightforward ways to get financing.
- Business Credit Cards-This may not seem like a topic that should be added to an article about business loans, but it is a common way to finance your business. The main downfall, as you may already know, is the high interest rates that they will have. If you pay the total amount due every month, most of the time, you will not have to pay any interest fees.
- Business Overdraft-This topic is not a loan either, but it is a way for you to get some financing without having to fill out any added paperwork. This works on your normal business checking or savings account. You can take it into the red to pay your bills, up to a set limit, with added interest. Pay this off as quickly as possible to avoid more fees and interest costs.
- Invoice Financing-This is a loan that is based upon your receivable amounts due to you by customers that have credit accounts. The lender will look at your invoices and determine exactly how much you are owed. They will then take out their set percentage rate and give you the rest. Some lenders may have other fees that they add on, as well as the percentage. This is an effective way to get the money owed to you fast, but you only get a percentage of what you can get if you wait.
- Low or No Document Loan-This type of loan you can only get from a non-banking lender, such as an online site. This is the loan that you may need if you are just starting out. In this case, you have little, or no, documentation that bank loans require. This is a way for you to get financing when you lack the required documents, but the interest rates will be higher than normal.
- Traditional Bank Loan-This is the loan that is most common to you. It is a loan that requires you to fill out substantial amounts of paperwork so the lender can access your risk level. You will need collateral to put up against the loan, such as your business equipment. These types of business loans can take up to two months to get approved for, and they have an extremely high rate of rejection.
- Business Equity Loan-If you are willing to put your business, or personal, property up as collateral this will be the best loan for you. The main benefit of it is that you can borrow up to 100% of the property value. Lenders will offer different interest rates for the loan, but they will be competitive because they know that if you go default, they can easily sell the property to get their investments back.
- Unsecured Loan-This is one of the hardest to get, but it can be the fastest. This loan will be based on your cash flow. If your business has enough profits left over to cover the loan repayment comfortably this loan would be a smart choice for you. It can get you financing fast without much hassle if you qualify.
Getting the best business loan all depends on your needs, and your ability to pay it back. Lenders are in the business to make money so if you can pay them back, with interest, they will loan money to you. By knowing what they look for, and what types of loans are available, you can make an educated decision and get the perfect option.