In the middle of the COVID-19 pandemic, banks processed $2.5 million worth of SBA loans in a matter of hours to help small businesses stay afloat.
Whether it’s because of a pandemic or you’re starting your business, a small business loan can be helpful to get you on your feet. But did you know there are different types of small business loans available to business owners today?
Continue reading for more insight.
Line of Credit
One of the most helpful types of loans for small business owners is a line of credit.
Read | 3 Questions to Ask Before Getting a Line of Credit
When your business is approved for a line of credit, you get the freedom to spend the money on kind of business purpose, just as long as you’re staying within your limit. You must repay whatever you’ve spent, along with the interest or service charge, by the end of the billing cycle.
Your limit, or even getting approved for the facility in the first place, will depend on your business credit score and financial history you’ve built with the lender.
A term loan is one of the most common ways to finance your business. With this loan, you get a lump sum of cash upfront, and you’ll repay it with interest over a determined period.
There are few different types of term loans, but the common ones are short-term loans, medium-term loans, and long-term loans.
You can get these loans from traditional banks and credit unions, but online lenders are fast becoming a favorite among borrowers. Online lenders can let you borrow up to $1 million and the approval turnaround time is quick.
Term loans are good for businesses that are wanting to expand.
If you have a strong business and good credit, you should be able to qualify for this loan.
Small Business Administration (SBA) Loan
The Small Business Administration is a federal organization. It serves to be a resource for small business owners, and it offers low-cost loans that are government-backed.
There’s a range of SBA loans, including:
- Standard 7(a) loan program
- Microloan program
- SBA Express loan
- SBA Export express
- Export working capital
- Veteran’s Advantage
The SBA loan you go for depends on your specific needs. For example, if you’re a veteran who owns a small business, you stand a good chance of getting approved for Veteran’s Advantage.
SBA loans typically have favorable terms, but qualifying for one can be difficult.
Equipment loans are great if you’re looking to purchase high-cost equipment for your company. This is essentially a secured loan, with the equipment serving as collateral. So, if you default on the loan, your lender will seize the equipment.
Learn More About The Types of Small Business Loans
We have highlighted the most common types of small business loans, but there are many more in the lending market. Before you apply for or sign up for any loan, do your research and shop around to make sure that you are getting the best rate.
Explore our blog for more small business tips and hacks.