A small-business loan is a source of capital that can help you stock your shelves, buy new equipment or expand your footprint. Business owners can access funding through traditional banks, online lenders and community lending institutions.
When choosing a small business loan, it’s important to consider the loan amount, interest rates, repayment terms, and eligibility requirements. It’s also important to research and compare different lenders and loan options to find the best fit for your business. Below, we compare the best small-business loans, including bank and SBA loans, business lines of credit, term loans and equipment financing. Plus, learn how to qualify and find the right financing for your needs.
SBA loans:
These are Small Business Administration loans that are guaranteed by the government and offer low-interest rates and flexible terms. These government-guaranteed loans are best for businesses that don’t meet bank eligibility criteria, but still have good credit and strong finances. They are ideal for businesses that need long-term financing.
Term loans:
Banks typically offer small-business loans with the lowest interest rates and most competitive terms. These products are well-suited for established businesses with collateral and strong credit.
Traditional bank loans that offer a lump sum of money that is repaid over a fixed period with interest. They are ideal for businesses that need a large amount of capital and have good credit scores.
Lines of credit:
A bank line of credit offers greater flexibility than a term loan. It allows businesses to borrow money as needed and repay it over time. They are ideal for businesses that need flexible financing and have good credit scores.
Equipment loans:
Equipment financing is best for small businesses looking to purchase machinery or equipment. They are ideal for businesses that need to purchase expensive equipment and have good credit scores.Since the equipment itself serves as collateral, equipment loans can be more affordable and easier to qualify for than other types of small-business loans.
Microloans:
SBA microloans are small-sized loans that are typically less than $50,000 and are used for working capital, inventory, or equipment. These loans are issued by participating community lenders — and have more flexible requirements than other types of SBA loans. They are ideal for startups and businesses with low credit scores.
Invoice factoring:
Invoice factoring is a financing option that allows businesses to sell their unpaid invoices to a third-party company for a fee. These allow business-to-business companies to access capital that’s tied up in unpaid invoices. This type of fast funding can be useful for managing cash flow issues or paying short-term expenses.
It is ideal for businesses that need to improve their cash flow and have outstanding invoices.
Read aslo – How to Apply for a Business Loan in 6 Easy Steps