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Loan types

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Here’s what you should know:
1. There are fewer small business loans being awarded these days.
2. Most lenders specialize in certain loan types.
3. Not all business loans are going to be right for your business.
4. Interest rates vary based on the loan type and whether or not the loan is secured or unsecured.

Secured and unsecured loans:
1. A secured loan is a loan that is backed by collateral. It offers lower interest rates, and longer term loans.
2. An unsecured loan is based on credit worthiness and financial strength of the company. These are typically short term loans that need to be paid back within a year.

Interest rates:
1. The type of loan you get will impact the amount of interest you will pay.
2. Interest rates vary from about 5% to as much as 35% or more.
3. The cost of the loan depends on the loan type, the loan product, and the terms of the loan.

If you want to benefit your business the most, and get the best loan to help your business succeed, then you need to understand the wide variety of loan products available, and how to increase your chances of getting funding by selecting the loan that fits your business needs best.

The following lists a few of the loan products available to businesses, and the average interest rates they tend to carry.
• SBA loans- 5.8-8.5%
• Accounts receivable factoring loans- 10-15%
• Merchant cash advance- 18-22%
• Start-up loans- 5-7.5%
• Franchise start up loans- 10-30%
• Business acquisitions- 4.75-7.5%
• Line of credit- 5-24%
• Professional loans- 5-10%
• Equipment financing- 8-25%
• Construction financing- 7-8%
• Hard money equity loan- 15-30%
• Working capital loans- 3-7%
• A/R or P.O. Financing- 8-30%
• Peer to peer loans- 6-36%
As you explore your business finance options, you will see that your business may benefit from a certain loan type over another. Take the time to understand which loans are secured and which are unsecured. Which are short term, and which are long term. Determine if a start up loan or a SBA loan is going to be the best option for you to get your business going, if an equipment loan, or a professional loan is going to be the best for your business, etc. Compare the interest rates, the terms of the loan, and more.

Not all lenders offer all loans, taking the time to understand the loans that are available to small businesses, and which is best for you, will help you minimize the list of potential lenders, and choose one that may be able to increase your chances for financing.

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Posted by DK
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