Being enterprising is always a good trait; wanting to start a new business endeavour or even expand it, requires courage and commitment. And funds. Funds are very important. So here, we list a few types of SME loans that you can apply for:
- Term loans
These are the most common type of loans you can apply for. With term loans, you borrow a certain amount of money which you repay over a certain period of time, usually ranging from 1-5 years. The terms of the loan depend on a wide range of factors such as the purpose of the loan, the amount, the loan taker’s credit rating, the lender, etc. Term loans can be acquired from both, bank and non-bank lenders.
- Short term loans
If you are in the need of working capital to handle your temporary cash flow, then short term loans are the way to go. When you need funds as soon as possible, to buy an inventory, pay your employees, paying off taxes, refinancing other debts, etc. you could opt for a short term loan. These loans are similar to traditional loans, except that the rate of interest is higher here, and you will most likely have to repay the loan in quicker instalments, sometimes in daily instalments as opposed to monthly ones.
- Equipment loans
If you need to buy an equipment for your enterprise, you could take this type of loan. You set the equipment itself as collateral, so in case you are unable to repay the loan, the lender can take possession of the equipment as payment. An equipment loan is easy to get and usually comes with a fixed everything- term length, interest rate, and monthly payments. Usually, the term length is equal to the anticipated life of the equipment itself which means that you have adequate time to make money and pay it off.
- Line of credit
For those who often need working capital, a line of credit is a good financial option. Such loans can be unsecured, requiring no collateral, or secured which means that your inventory or equipment acts as your collateral in case of non-payment. Advantages of a line of credit include not having to pay any interest until you actually tap into the loan funds. You can also get revolving credit which means that you continue to get credit without having to reapply again and again. If you have good credit credibility, and repay loans on time, the interest rates are lower than the traditional term loans.
- Merchant cash advance
Although it has a high interest rate, this is a good loan option if your enterprise receives major payments through customer’s credit cards. This type of loan involves minimal paperwork. The lender will loan you money based on your credit card sales. You repay the loan by giving the lender part of your daily credit card sales along with a fee.
With so many viable financing options, make your dreams of flying high, a reality.