There are many business owners who will need a loan to expand and grow their company. In some situations, a business owner will not be able to get a loan from a traditional lender. They may feel they have no other options for a loan.
They would be wrong.
There are a number of financing options available today for a business owner. Here are a few of them:
Unsecured And Secured Loans
The two most common loans are secured and unsecured. When a lender has confidence in a business and their ability to repay a loan, they will provide an unsecured loan. This is a loan without the requirement to provide collateral.
When a lender requires collateral, it is a secured loan. Collateral could be the assets of a business such as real estate, equipment and more. With a secured loan, if the business owner is not able to repay it, the lender takes possession of the collateral that was provided.
Line Of Credit
One of the most effective types of loans for a business to have is a line of credit. These are funds that a company can borrow at any given time.
A business will be able to only take the amount they need when they need it and then pay it back. This gives a company quite a bit of financial flexibility. It will provide an important financial cushion. This can help a business overcome times when they need an emergency cash flow. It will also eliminate the need to apply for a loan in a difficult situation.
It is possible for a company to get different types of loans from the Small Businesses Administration (SBA). These are loans a business owner can get that are partially guaranteed by the US government. When these loans are approved, it will make a business owner more attractive to other lenders.
*The SBA 7(a) loan is it’s most popular financial product. It is able to meet the needs of most businesses. A businesses owner can apply for a 7(a) loan using an SBA lender.
*The SBA also offers a Microloan program. This is designed to provide business owners with a loan of $50,000 or less. In this situation, the SBA is providing its own money. Getting approval for this begins with a microlender intermediary.
*A business owner may need to buy large fixed assets such as commercial real estate, equipment and more. In this case, they will want to look into the SBA’s CDC/504 Loan Program. A businesses owner will need to contact a Certified Development Company (CDC) to pursue this type of SBA loan.
With this type of business loan, the entire amount is given to the owner at the time they sign the loan contract. During the loan pay period, the business owner will only have to pay the loan’s interest. The principal is due on the final day of the contract. This is considered a balloon payment.
Many business owners use this to obtain supplies and other things during their busy season and more.
Letter Of Credit
This is often used when a business wants to expand in another country. A letter of credit enables a business owner to guarantee payments to suppliers in foreign countries. It is a document that represents the bank’s credit on behalf for an entrepreneur. It will guarantee funds up to a specified amount for a designated period of time.
Finally, when an entrepreneur wants to start a business they could apply for a personal loan. This is a loan based on the entrepreneur’s financial history and situation. Should the business not do well, it is the entrepreneur who will be responsible for paying back the loan.