Are you worried about starting your new business or expanding the existing one? Need a unique solution for it? No problem. Small Business Loans are best in achieving your business targets. And during this pandemic time, small business financing can help your business stay afloat amid disaster.
The loan programs that direct lenders and the small business administration offer include the SBA Paycheck protection program. This can infuse working capital loans and financial support when you need it.
How Do Small Business Loans Work?
Investors can use small business loans for business expenses, while other loans are for business expansion. You can use the loans such as working capital, real estate loans, and equipment financing for some other specific use.
Generally, small business loans are non-consolidated that you have to pay back with an interest rate over time. Yet, there are various types of business loans, so the owners of small business loans should research their options to find the best suit.
Types of Small Business Loans
Let’s jump to the different types of small business loans and explore their benefits to investors.
Equipment Loans: An equipment loan is a type of financing that investors can use to purchase any equipment for their business. In this way, the cost of the machinery is spread out.
Usually, this equipment serves as collateral for the loan.
Term Loans: A business term loan offers a fixed term and repayment amount, which the borrower must pay in monthly installments. Remember that with each payment, you will have to pay the interest as well.
A business line of Credit: Business lines of credit is just like your credit card, which you can use to buy equipment or inventory. Furthermore, you can use this line of credit to manage fluctuations and to invest in marketing. But a credit card limit also includes a limit to which you can repay or borrow. Although, you will be charged interest for the money you draw.
Invoice Financing: If you face a continuous struggle with cash flow in your business, you can easily use invoice financing. If I put it in simple words, it means that when you are waiting to pay all your invoices, which leads to disturbing your business, you can quickly sell your unresolved invoices to the lender at a discount price.
Real Estate Loans: As its name suggests, this is a term loan that you can use to buy, develop, or renovate a property or warehouse.
Franchise Loans: You can use the franchise loans to cover the expenses of the standard business openings and franchise-specific costs. Some franchisers also offer funding that helps you to build your franchise.
Marchant Cash Advances: The lender can ultimately provide you with a lump sum based on your future sales with the merchant cash advance. But this cash advance comes at a high cost because this cash advance requires you to borrow the capital against your future sales. In trading for a lump sum of cash, you have to repay it with weekly transfers from your bank account or credit card sales.
It is easy to get a merchant cash advance quickly, but the high interest rate makes this loan a significant risk. All the credit card sales serve as collateral in merchant cash advance.
Who is eligible for Small Business Loans?
As mentioned above, there are various business loans that you can borrow from banks and lenders. Now, we will see who can get these loans and what is the eligibility criteria for this?
The essentials you need depend on the lender you choose and the type of loan you are applying for. Anyway, there are some other essential things you will need, like the following:
- Personal and business credit score
- Annual Revenue
- Business plan
- Legal documents of your business
- Bank Statement
- Individual and business tax returns
- Purpose of a loan
What credit score is required to qualify for small business loans?
To qualify for a small business loan, you need at least the average credit score of (600 to 850), but it may vary depending on the lenders.
If your credit score is excellent (800-850) or even good (670-799), then you will have better odds. With the financial products, if your credit score is higher, you will receive better interest rates.
Mainly, when lenders are setting minimum credit score requirements, they focus on your credit score. Hence, they can check your business credit score as well. But directly, they don’t state any particular requirement for business credit scores.
To recapitulate, we can common that you can get small business loans from different lenders, with limitless choices tailored to the financial situation of your business. By expecting what lenders will require and review, you will increase the chances of obtaining a beneficial small business loan.
Finding the correct business loan term is not an easy task because it is securing the money that you’re growing business needs. That is why BitX funding makes small business loan terms simpler and more accessible for the borrower. If you need quick cash or long-term loans, BitX funding will help you and provide you with the right financing option.