Undoubtedly, starting a new business or sustaining an existing one is tough post-pandemic. You need to finance your business for various reasons, like buying new equipment, stocking your shelves, hiring new staff or expanding your footprint, etc. Your success as an entrepreneur critically depends on the small-business loans you choose from the preferred authorized lender.
There are different sources of business financing apart from the national and traditional banks like credit unions, alternate banks, regional banks, etc. For SMBs, the average interest rate depends on the qualifications as a borrower, type of lenders, and the type of loan you opt for. But you don’t need to go for the cheapest financing that you qualify for. Cost may be a primary factor for your business funding, but it is also essential to consider other factors like the repayment structure, the size of the loan, the approved use case, credit score, cash flow, etc.
In this blog, we share the Top 5 small business loans in 2021 to cater to all your business needs.
Types of Small Business Loans
If you need funding for a small business start-up or keep your existing business afloat, check out the various loan options mentioned below.
1. SBA Loans
For small business owners, who wish to take a low-cost government-backed loan, SBA or Small Business Administration loans are the best choice. At times, the long application process can delay your funding and may take up to three months. But it is a good option for those seeking low-interest rates and fees. There are some authorized intermediary lenders to finance small businesses. Borrowers can lookout for the best lender by comparing various SBA loan offers through a reliable funding marketplace and get the best financing according to their needs.
2. Term Loans
It is a lump sum of cash that one needs to repay over a fixed term, and it is one of the most popular types of small business loans. It is useful in meeting the short-term and long-term financial needs of small business owners. There are fixed monthly payments and the interest is calculated on the principal balance. Term loan offers the flexibility to use it for various requirements, like everyday expenses, equipment, business expansion, and other uses. SMB owners can secure a customized term loan in a short
funding time with varying interest rates. Innovative lending platforms can help you choose short-term, intermediate-term, or long-term loans for different loan amounts and repayment cycles.
3. Equipment Loans
This loan is the best if you want to purchase expensive machinery, vehicles, or equipment, including computers and furniture, but not have the capital for an initial investment. This small business financing helps business owners to purchase or lease fine tools and machinery to start. Mostly, the purchased equipment is used later as collateral and if you are unable to repay the loan the lender can seize the equipment to recoup the losses. The expected life of the equipment serves the repayment term. One of the basic requirements for equipment loans is that the business must be operational for at least 6 months. This loan is preferred in case of machines or tools required to smoothly run businesses related to agriculture or farming, manufacturing, logistics, warehousing, retail, technology, etc.
4. Business Lines of Credit
Adequate cash flow is essential to pay your suppliers and run your business profitably. It is like a credit card, where borrowers have a revolving credit limit to access through their checking account. If you are uncertain about how much money you may need, then you can go for the business line of credit. Line of Credit is used to meet the short-term goals and address cash-flow issues. It is popularly used to finance purchase inventory, capital expansion while offering flexibility as well. The interest is incurred only on the withdrawn amount and you can spend up to the maximum credit limit.
5. Accounts Receivable Financing
At times, business owners find it challenging to receive on-time payments. In that case, choosing Invoice Factoring & Invoice Financing is the best way to use or sell your unpaid invoices as collateral for the upfront invoice value. AR Financing provides you with the immediate finance your business needs to stay afloat, using the invoices as collateral. The benefits of opting for AR Financing are that there is zero debt, short term commitment, with a swift loan approval process.
To Conclude
Business owners who have budget limitations can look up different loan options and choose the most suitable one to run their business successfully. A smart lending marketplace, like Smansha, offers a multitude of loans to suit the business needs of start-up owners and existing entrepreneurs. Go
ahead with the best business loan that suits your requirements and payback capacity and gets started!
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