Finding a Loan for Your Small Business

In this article, we’ll show you the various financial options available to businesses such as SBA loans, forgivable loans and working capital loans.

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Starting a business and sustaining it can sometimes be difficult, which is why many people consider small business loans to grow their business.

You’ll learn how to leverage small business loans to start, grow and sustain your small business. These loans can be used to start a business or expand a business to greater heights. 

It can help you take care of your operational costs so you don’t exhaust your funding.

There are several loan programs from the Small Business Association (SBA), direct lenders, and SBA Paycheck Protection Program to help you get financial assistance with ease.

Types of small business loans

Term Loans

A term loan is a monetary loan with a fixed duration and repayment amount. It can last between one to ten years. However, in some cases, it could last up to 30 years.

Each time you make your payment, you’ll pay both the principal and interest.

Equipment loans

Equipment loans are used to purchase equipment that your business requires to achieve maximum productivity.

As a small business or an existing business looking to expand, you might need to purchase, upgrade, repair, or replace the equipment in your custody.

Therefore, if you don’t have the capital to get things done, you can leverage equipment loans.

However, the equipment will serve as collateral against your loan to protect the interest of the lender.

Business lines of credit

A business line of credit is a loan that gives you access to funds that you can use to meet your temporary business needs.

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You can purchase equipment with it, inventory and invest in marketing.

However, you’ll have to pay interest on the amount you took from your line of credit. Additionally, ensure that you make your payments early and don’t go above your credit limit.

Real estate loans

A real estate loan (mortgage) is a loan that is commonly used to purchase or develop real estate projects like a building, retail center, warehouse and many more.

Once approved, the borrower will sign a legal document known as a mortgage note saying that the borrower will pay back the loan with interest and other fees over the agreed time.

Invoice financing

Small businesses leverage invoice financing to take loans against money that customers owe them to pay suppliers and employees, improve cash flow and grow their business.

This means that if you have unpaid invoices from customers and need funds to get things done, you could sell your unpaid invoice to a lender at a discounted rate.

Franchise loans

You can leverage a franchise loan to cover your business opening overhead and other costs like franchise fees or marketing fees.

Some lenders will even offer you funding to start up your franchise.

Small Business Administration (SBA) loans

SBA is a governmental agency responsible for providing loan guarantees, direct loans and support to small businesses to enable growth.

Commercial lenders certified by the SBA are responsible for fulfilling SBA guaranteed loans.

SBA’s 7(a) primary lending program is a widely popular and flexible SBA type of loan that offers financial support to small businesses.

You can apply through a lender who is part of the program, get loans worth $5 million, and repay them monthly.

The loan maturity period will depend on how you’ve used the money. However, its usual range is between five to 25 years.

If your business needs quick access to funding, you can leverage the SBA Express loan program to begin the application process.

After submitting your application, you’ll get a response in 36 hours to know the status of your application.

The max amount you’re eligible for is $350,000 and the SBA offers a 50% guarantee on loans gotten through this program.

Paycheck Protection Program (PPP) Loans

The federal government formulated the Paycheck Protection program in 2020 to help small businesses keep their business afloat and keep paying their employees during the COVID 19 calamity.

The application deadline was initially set for March 31, though it has been extended to accommodate many beneficiaries.

The PPP interest rate is 1% and once approved, you’ll need to repay it within five years.

Meanwhile, the United States SBA can forgive your loan if the funds were used on eligible expenses and you have met all the employee retention criteria.

As a first-time borrower, you’re entitled to 2.5 times your average monthly payroll expenses at a max amount of $2 million.

Second-timers are also entitled to 2.5 times their average monthly payroll expenditure at a max amount of $2 million.

Furthermore, the federal government has come to aid those in the food services and accommodation industry.

They are allowed to borrow up to 3.5 times their average monthly payroll expenditure.

As a contractor or a self-employed individual, you can leverage the PPP to keep your business afloat.

Furthermore, sole proprietors with payroll expenditures and those without will also qualify for PPP loans.

The Bottom Line

Every small business owner needs loans once in a while to keep their business alive and enable rapid growth.

As a small business owner seeking financial assistance, there are several options for you.

SBA loans are low-interest loans that are government-supported, and you should take advantage of them.

Contact your financial adviser or financial institution to know which loan program is suitable for your business so you can begin the application process.

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