Do you have a business idea you are trying to put into action? Are you planning on funding your business venture with a loan? Before you sign any agreements, it is important to learn the different types of business loans.
Not knowing the different loan types can cause you to sign on the wrong loan agreement. Not to worry, we got you covered. Keep reading for a breakdown of the different business loan types.
Term Loans
Business loans help businesses grow or maintain operations. The most common types of business loans are short-term, medium-term, and long-term loans. Of these, term loans are the most popular form of financing.
A term loan is repaid over a specific period of time. Usually 3 to 10 years, and is usually used to fund larger-scale projects. The interest rate for a term loan may be higher than that of a short-term loan.
But it offers more stability and predictability with a fixed repayment schedule. The loan amount may also be much larger than with a short term loan. Term loans may require collateral, such as real estate or machinery, and loans are often used by borrowers to purchase equipment, finance an expansion, and cover other large-scale business expenses.
SBA Loans
SBA Loans are loans provided to businesses that have met certain criteria and are backed by the government. This offers easier eligibility and flexible terms. The application process is done through a participating lender like a bank, credit union, or non-profit lender and involves filling out a loan application and Finance Business Plan.
The SBA also offers other loan programs to fit the needs of small businesses. One common type of SBA Loan is the Economic Injury Disaster Loans or EIDL. This loan is helpful for those who were affected by economic adversities.
If your business suffered from economic problems, this loan could be helpful for you. But make sure to do some research to learn more about EIDL loans.
Equipment Loans
This type of loan allows businesses to purchase larger and more expensive equipment with financing from a third party. Equipment loans typically have longer repayment terms than other types of business loans and usually carry lower interest rates. These loans are often used to finance items such as computer systems, copy machines, and industrial machinery.
The repayment for an equipment loan is usually based on the useful life of the item purchased, meaning businesses should be conscious of their budget when financing equipment with this type of loan. It is a great option for businesses to invest in larger, long-term equipment without making a large initial investment.
Personal Loans
Business loans are types of loans specifically created to support businesses. They come with a range of repayment terms, loan amounts, and interest rates. Some of these loans are guaranteed by the government, while others are provided by private lenders.
Personal loans are a type of business loan specifically designed for individuals. These loans can be applicable for a variety of business purposes, including starting or expanding a business, purchasing equipment and supplies, or financing a business venture.
Learn More About the Types of Business Loans Today
Business loans provide great opportunity to those needing additional financial resources. There are many different types of loans and lenders to choose from, each offering their own advantages.
Evaluate all the different types of business loans to ensure you make the best decision for your business. Now is the time to explore what types of loans are available to help your business succeed.
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