Small Business Loans

There are many types of loans for small businesses out there to consider. The most common types of business loans are:

 

Other options include business lines of credit and business credit cards. Depending on the loan you choose, you’ll have repayment loan terms from anywhere between one to 10+ years. Be aware that some loan programs, like an online business loan, will have much higher interest rates than other types of loans, so be sure to do your research.

 

At some point, nearly every small business will need some extra capital to help boost their business. Whether your business has been around for generations or if you’re just starting out, there’s a business lending option for you.

 

For example, if you’re a new small business owner, you may need to get equipment to start your operations. A business loan can allow you the flexibility to make those investments.

For a growing small business looking to expand, a business loan can help finance opening a new location. It can also help a business owner with hiring and training additional employees.

 

If you’re a mature business owner, you may be ready to invest in remodeling or planning long-term business expansion. Business lending can give you the freedom to take your business to the next level. For example, a working capital loan can give you peace of mind knowing that you have an extra cash cushion during your slow season.

Term loans: With a term loan, you borrow a set amount of money upfront and you’ll pay back the money, with interest, on a repayment schedule. Traditional banks and online lenders offer term loans for small business owners. To qualify for a term loan, you will need a minimum credit score of 680 and record you’re your business has been profitable for at least two years. Term loans are a great option for large businesses with an established financial track record.

 

SBA loans: The SBA offers loans through its partnerships with banks, credit unions, microlenders and community development programs to issue loans for small businesses of all types. SBA loan amounts can range from $10,000 microloans to $5 million 7(a) loans with repayment terms ranging from 5 to 25 years. The SBA is looking to help small business owners that need a long-term loan but don’t quality for traditional bank loans.

 

Equipment loan: Also known as equipment financing, equipment loans are one of the most popular types of asset-based loans. If you are planning to purchase machinery, computers or even furniture for your business an equipment loan can help fund the purchase and you can pay it back overtime, with interest. Your interest rate on an equipment loan typically depends on your business’s age, credit history and finances.

 

Online business loans: Alternative lenders make it accessible and efficient to quickly get an online business loan. These alternative lenders have a higher risk tolerance and fewer requirements. So, small business owners with poor credit or newer businesses can get an online business loan. Be aware that online business loans can come with higher interest rates, especially if you have a low credit score.

 

Personal loans: This is a popular option for startups and new businesses if you have a good credit history. Online lenders can process applications faster than bank and credit union lenders, which means you can receive your funding sooner. Using a personal loan for business use is an option that will depend only on your personal finances and credit score. Typically, your credit score needs to be above 650 to qualify for this type of loan. This type of loan is great if you’re looking to secure smaller amounts of capital, but if you need a loan larger than $35,000 you will need to find other sources of funding.

 

Business Lines of Credit: If you want an emergency cash fund to help cover unexpected cash flow gaps, a business line of credit can give you peace of mind. With a business line of credit, the lender will give you a specific amount of money you can tap into at any time as needed. You will then pay your balance like how you would pay off a credit card. Short-term lines of credit are available if you have a younger business or a low credit score.

 

Each lender and loan program may have unique requirements you must meet to get a small business loan. Requirements for small business loans often include an annual income of at least $20,000 (some lenders may accept lower) and a good credit rating. Many lenders may also require you to have been in business for a certain number of years, usually longer than one year.

 

Most lenders, like the SBA, require you to be a for-profit business and you must do business in the U.S. or its territories. SBA loans also require small business owners to have business insurance coverage. You can get a quote for business insurance from The Hartford today.

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