Did you know the SBA gave out over 14 million loans to small businesses just in 2020?
There are a variety of different types of business loans available today. These loans come in many forms and are necessary for small businesses of all sizes. If you’re thinking about getting a loan to launch or expand your business, you might want to know what these types of loans are.
This article covers the most common types of business loans that exist today to help guide you in making the right decision for your business. Read on now.
Unsecured Loans
Most loans are unsecured, meaning the borrower doesn’t have the account balance required to secure the loan. This means that if someone wants to take out a loan, they don’t have to put up collateral or show up with a deposit to support the amount of the loan.
The lender doesn’t have any collateral, and they don’t have to show up with any money to back up the loan. Unsecured loans are typically available to startups and small businesses with no history or track record of making debt payments.
The borrower will repay a portion of the loan at the end of each period, forgiving the rest of the loan. The borrower and the lender can determine the amount of the loan and the repayment schedule.
Businesses Lines of Credit
A line of credit is a short-term loan your business can take out with a lender. The lender will hold a portion of your deposits and cash flow while you make payments to them, and they’ll take back most of their money at the end of each period.
The amount of the loan, the repayment schedule, and the interest rate can all be determined by the business’s cash flow, the lender’s interest rate expectations, and the borrower’s credit score.
Consolidation Loans
A consolidation loan is a type of loan that’s similar to a business line of credit, but you can use it to acquire real estate. The difference is that with a real estate loan, you’ll have to pay a transfer fee when you sell the property, and you won’t be able to refinance the loan later.
The loan amount, payment schedule, and interest rate can all be determined by the prospective lender’s interest rate expectations and the property’s purchase price.
Franchise Loans
A franchise loan is a short-term loan that’s targeted toward franchises. The loan will be for the length of time the franchise is in operation, and the business will hold a portion of the funds used for daily operations while the loan is active.
The amount of the loan, the repayment schedule, and the interest rate can all be determined by the length of the franchise and the operation’s cash flow.
Equipment Loans
An equipment loan is a short-term loan targeted toward businesses in the process of purchasing equipment. The loan will be for the purchase amount, and the business will hold a portion of the funds used for daily operations while the loan is active.
The amount of the loan, the repayment schedule, and the interest rate can all be determined by the purchase and the equipment’s expected life.
If you want to read about business funding solutions, use this link.
Types of Business Loans for a Small Business Owner
There are several types of business loans and each one serves a different purpose for your business. Selecting the best business loans is a part of smart management.
Keep scrolling for more information on business ownership and making smart decisions for your company.
Alison Lurie is a farmer of words in the field of creativity. She is an experienced independent content writer with a demonstrated history of working in the writing and editing industry. She is a multi-niche content chef who loves cooking new things.
