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It’s not unusual to need a business loan to cover expenses you can’t handle with your current budget. Seasons and circumstances change, impacting daily cash flow and your ability to support continued growth. Before approaching a lender, educate yourself on the types of loans available, the terms you can expect, and what documentation will be required to determine eligibility.
|Business loan type||Best for||APR range|
|Secured loans||Companies with property to put up as collateral||6% - 8%|
|Unsecured Loans||Good credit scores||4% - 36%|
|Line of credit||Ongoing working capital expenses||9% - 108%|
|Merchant Cash Advance||Good credit, low risk||2% - 60%|
|Accounts receivable||Outstanding invoices, short term debts||3% - 8%|
|Equipment loans||Necessary equipment to grow business||6% - 99%|
|Construction loans||Expansion or new facility||2% - 7%|
|Invoice factoring||Filing cash flow gap||11% - 64%|
Lenders offer a variety of loans for businesses depending on what the money is going to be used for and how companies are able to guarantee payment.
Each loan type has a specific payment structure, term length, and interest rate. Some are more difficult to qualify for than others, and most require you to present detailed paperwork when applying.
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When seeking financing for growth or to cover gaps in cash flow, small businesses have a surprisingly easy pathway to funding thanks to the tailored loan solutions available. Unlike traditional loans extended to enterprise level companies, small business loans are easier to access, quicker to apply for, and have friendlier terms for repayment.
Finding the right loan is not a problem thanks to the rise of financial services providers and new companies that offer quick funding and straightforward approval processes. Additionally, the requirements many companies set for approval, such as lendio , tend to be much accommodating for small businesses.
Unlike enterprise-level loans, which are usually extended by large banks, small businesses have different options when seeking financing which can be much more beneficial. Aside from banks, small companies can take advantage of federal loans such as Small Business Administration loans, work with credit unions, or even consider online alternative lenders.
For these online lenders, working with smaller companies is more useful considering they can be growth partners and create lasting working relationships. Additionally, these lenders often provide different forms of financing outside of traditional loans, which are better suited for some businesses. Services such as invoice factoring, lines of credit, and equipment loans can help small businesses more as they provide a targeted influx of capital. These financing types offer flexibility and let smaller companies take loans without putting themselves at a disadvantage.
Generally, lenders are looking for small businesses that meet the following requirements:
Requirements will vary between the different alternative online lenders, but small business loans are a great way for expanding companies to find the funds they need to sustain growth and help them reach performance targets.
Acquiring a business loan can be more difficult than obtaining funding for other purposes. Business loans represent a big risk to lenders because of the volatility of the consumer market. Although marketing analytics are making it easier to predict customer behavior, many unknown variables still affect business cash flow and profits. This is another reason why banks want to know exactly what you plan to do with the loan should your application be approved.
When applying for a loan, you’ll discuss terms, interest rates, and other details with the lender. It can be a long process requiring a lot of detailed financial information from both personal and company accounts, and you’ll likely need to speak with more than one lender to find the right fit.
Remember, a loan is a binding agreement for a given period of time, and once you sign the documentation, you’re committed to paying the money back according to the agreed-upon terms. Make sure you know exactly what you’re getting into before the loan is finalized.
Because of the time and expense involved, consider whether you actually need a business loan and if it will benefit your company before applying. If you determine that a loan is necessary, prepare a list of questions to bring along when you compare loans from different lenders. Your list should help you narrow down your choices to banks and other lending institutions offering options closely aligned with your business needs. You may want to ask:
Once you decide what type of loan you need, your lender will request certain documents and financial records to determine if your business qualifies. These documents may include:
The lender will review this information along with your application. However, before taking the time to gather such an extensive amount of paperwork, review the specifics of the loan one more time. Ask questions about anything you still don’t understand, and be ready to move on to another lender if something doesn’t sound right. If the cost of the loan is more than the benefit you’ll get from it, you’re better off seeking alternative options.
A business loan can give your company the boost it needs to make it through a difficult time or fund growth to catapult you to future success. Talk to a variety of lenders before making your final decision to find the terms and conditions compatible with your financial situation. Structure your budget so that you stay on top of loan payments to ensure your business winds up stronger and more profitable once the balance is paid off.
On this page, you’ll find a list of some of the highest-rated lenders in the industry. Check out their reviews , compare their features, and find the lender that’s best suited to meet the needs of your business.