Small business owners know that obtaining lines of credit for their businesses can be a difficult task to accomplish, especially if they are a new business or simply a business that does not have a strong credit history. I have created this list so that you as a business owner can have an idea of who to contact for your financial needs.
Secured Loans – For business owners with a strong credit history.
Startup Loans: Small business start-up loans are used by merchants who need funds to develop an idea, purchase a franchise, or simply open a new business on the market. Most start-up loans are offered by lenders who require personal assets to secure your money.
SBA Loans (from Wikipedia): SBA programs are generally not for businesses with bad credit who can’t get bank loans, nor are they used primarily for start-up financing; rather, the primary use of the programs is to provide loans for longer repayment periods and with more flexible affordability requirements than regular commercial business loans. Also, a business can qualify for the loan even if the annual payment equals the previous year’s profit, whereas most banks would want a loan payment to be no more than two-thirds (2/3) of the profit of the previous year. profit for a business. Lower payments, longer terms, and more flexible affordability calculations allow some businesses to borrow more money than they otherwise could.
Secured Lines of Credit – A merchant’s line of credit is a type of revolving credit that can be used to access a limited amount of working capital. Business credit cards, for example, are a type of line of credit.
Unsecured Business Loans – These types of loans or cash advances are for business people who may not have great credit, or simply for business people who don’t want to put their personal assets at risk.
A merchant cash advance: Merchants who accept credit cards as a form of payment can sell a small portion of their future credit card sales for a set amount of cash. These types of advances are more expensive but have some advantages that appeal to most small business owners. Both the lender and the business owner agree to a daily repayment percentage that will be deducted from future credit card transactions until the advance is paid in full.
Invoice Factoring – The process of business owners selling their outstanding accounts receivable at a discount. Invoice factoring differs greatly from bank loans, the value of the invoices is taken into consideration and not the credit history of the company, invoice factoring is not a loan product, but a purchase of an asset, and lastly , but not least, this process involves 3 parts. of 2 that the bank does. These parties are: the Seller, the debtor and the Factor.
Unsecured Business Loans: These types of loans do not require personal collateral. Unsecured lenders will only finance business owners who have a good or perfect credit history, this is what defines whether or not the business owner qualifies for the loan.