New businesses require financial resources in order to invest in the proper equipment, training, infrastructure that they need to establish a sturdy foundation.
At the same time, established businesses often find themselves in need of financial resources to complete renovations like system updates and construction projects that will improve their day-to-day operations.
Sometimes, these financial resources are not readily available, whether due to high overhead, shifting demand for certain products or services, or a questionable economy.
Luckily, there are loan options available. Buying into cautionary tales of loans gone wrong is easy to do, especially when your business is on the line. However, loans have the potential to provide the money your business needs to succeed.
Here are 3 loans you should consider taking for your business, followed by 3 you should generally avoid.
3 Types of Lending to Consider
#1. Stock Loans
Stock loans lend your shares of stock to professional traders and money managers. This option lets you:
- Have quick access to the cash you are seeking
- Benefit from any increases in your stock even while it’s loaned
- Diversify your business’s portfolio
Companies offering loans are able to assist you through the process of obtaining a stock loan by offering one-on-one guidance with a trained accountant. Getting a stock loan is a personalized experience that is kept private for your business’s financial safety.
#2. National Bank Loans
Obtaining a loan this way is a safe and traditional route. Big name banks like Capital One and Bank of America offer a number of business loans that vary in length, incentives, fees, and interest. You will be able to easily find a loan that is right for your business’s unique circumstances.
You can even complete a majority of the loan process remotely, as a lot of banks offer online nationwide service. Additionally, national banks give you convenient perks, like 24/7 customer service and the ability to pay bills online.
#3. Credit Union Loans
Credit unions often lend money out at lower rates than banks do. Credit unions are conveniently and locally-based, so you’ll always have access to immediate assistance.
Their loan options are less diverse, but the number of different credit unions out there will make it easy for you to find the right loan for your business.
3 Types of Lending to Avoid
#1. Family and Friend Loans
This type of loan is tempting. Your mom, best friend, or sibling may be willing to lend you money for a minuscule interest rate (or none at all). But failure to pay back this loan can result in tension and damaged personal relationships.
It’s best to keep your business and personal life separate by opting out of these types of loans.
#2. Peer-to-Peer (P2P) Loans
There is a lot of uncertainty associated with P2P loans. The interest rates are often on the higher side.
Sometimes, too few lenders decide to fund your loan, which will result in wasted time and will leave your business without a loan. Save yourself this hassle and find a loan elsewhere.
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#3. Cash Advances
There are additional fees associated with this transaction, and your interest rate will very likely be higher than your purchase rate. Taking out a cash advance is a poor financial move for a business looking to be financially responsible for the long term.
A loan can help fund more inventory, equipment, and fresh and innovative employees.
Additional capital made available from a loan will set up your business for success. Whether you are just starting out or you have been a business owner for several years, it is important to be aware of the loan options available to you!