Guide to Choosing the Right Small Business Loan

Last updated on December 7, 2017

When it comes to small business loans, entrepreneurs should have a clear idea of the funding options that are available along with small business loan eligibility in order to secure funding with minimal delays. There are several types of loans available for small businesses from various resources such as online loan providers, like SummitFR.com, and banking institutions.. Some of these include the following:

• Working Capital Loan- Most financial institutions have working capital loans for taking care of day-to-day expenditure and business operations. These loans help businesses take care of regular expenditure while scaling up revenues. However, small business loan interest rates offered by multiple lenders should be compared carefully before taking a final decision. Working capital loans also help when it comes to expanding one’s business.
• Machinery/Equipment Loans- Many financial institutions offer funding for small businesses loans looking to purchase new equipment or machinery. Loans are offered for upgrading machinery, tools and other items including PCs, essential appliances, copy machines and lots more. These loans help in keeping cash flows intact for businesses since big down payments are not required. Refinance of equipment loans is also available in many cases. These loans are easier to apply for and obtain as compared to many other types of business loans.
• Line of Credit- The business line of credit feature is basically where a small business gets a dedicated credit line for a particular period of time. The business can then withdraw money from this credit line based on the expenditure at hand. Only the interest component is paid every month and interest is paid only on the actual amount used. The principal can be repaid once the loan tenor comes to an end.
• Merchant Cash Advance- Merchant Cash Advance is a unique loan that offers funding to traders/vendors/businesses based on the volume of their monthly transactions. There may be varying repayment terms. In some cases, a fixed amount is withdrawn every day from the account of the company while a percentage of daily sales is often taken in other cases. These loans are not hard to get and is directly repaid from monthly sales.
• Professional Loans- In case of self-employed professionals like chartered accountants, engineers, doctors and others, there are professional loans offered at competitive rates. These loans help in starting/upgrading/expanding practices and taking care of other expenditure including renovations, refinancing of debt and also investing in new equipment.
• Franchise Loans- These are specifically tailored loans for those entrepreneurs who desire funding for establishing a franchise based business. These loans may be used for taking care of working capital needs or even for paying the franchise charges along with purchasing equipment and developing one’s store or restaurant among other things.

These are some of the types of small business loans available at present. You should always compare the business loan interest rate offered by various lenders and should have a clear picture of how much and what you require in terms of funding. This will help you make the right choice. You should always have a grasp of the eligibility criteria in order to avoid future hassles.