Loan product types
In the world of business finance, cash flow is king. If you do not have the funds to cover your operation costs, inventory needs, etc. then you will not succeed for long. Thus, being able to qualify for business loans and financing is crucial to your success as a small business. The following is a look at some of the loan types available to small businesses, what terms they often carry, as well as the traditional interest rates. Understanding the options can help you to apply for the loans you need, and increase your chances of receiving funding.
SBA loans- Government backed loans offered through the private sector to businesses that qualify as "small businesses" according to SBA guidelines. These loans are usually funded within six months, and the payback period is five to twenty-five years. They are secured loans, and carry some of the best interest rates out there for business loans, starting around 5% and tending not to exceed about 9%.
Professional loans- Loans offered to professional doctors, dentists, and lawyers. These loans are offered as both secured or unsecured loans, and funding is typically two to six months. Interest rates vary by credit worthiness and loan type.
Equipment cash out refinance- Loans for existing equipment. The customer gets cash for existing equipment and then leases it back from the lender. The lease value is approximately 50-75% of vendor's valuation. This is a secured loan, and funding is usually under two months.
Equipment financing- Loans or purchasing equipment, where the equipment purchased then serves as collateral on the loan. Thus, it is a secured loan, and funding takes one to three months.
Merchant cash advance- Loans that use regular occurring monthly credit card sales figures to get an advance or loan. It is secured, and funding is under a month. The amount borrowed can be up to $150,000.
Construction financing- Commercial construction loans with a payback period of ten to twenty-five years; this is a secured loan.
Accounts receivable factoring loans- Loans that use invoices as collateral, where the financer buys the invoices for partial value, then collects on them and keeps what they collect. This is a secured loan with under a month funding.
Start-up loans- Loans for small businesses from private sector lenders to help with business start up. The funding takes one to five months, and the payback period is five years. These are secured loans.
Franchise start up loans - Loans for nationally known franchises. Most require 10-30% of the capital needed to come from the borrower, it is a secured loan.
Hard money equity loan- Loan from a local bank, funding takes two months, and it is a secured loan.
Working capital loans- Can be secured or unsecured, and takes on to three months to fund.
A/R or P.O. Financing- ARs and Pos serve as collateral for short term working capital loans. Funding is one to two months. These are secured loans.
Business acquisitions- Loans for acquiring an existing business. Funding takes one to nine months. They are secured loans.
Line of credit- These can be secured or unsecured loans. Funding is 2-6 months.
Peer to peer loans- Loan from an individual rather than a lending institution. The funding is one to three weeks. They are secured loans.