Navigating Loans For a New Small Business
Financing a new small business is always a challenge. In almost every case, the process will necessitate taking out one or more business loans. Fortunately, there is a wide variety of types when it comes to loans for small businesses — it is hardly a one-size-fits-all environment.
If you are looking to start a new business, read on to learn about some of the most common and useful types of business loans.
SBA loans are an important lending option for small business owners. SBA loans come in multiple types — from 7(a) loans to CDC/504 loans, to microloans, and more — and so there are options for all sorts of business needed. Best of all, they are partially backed by the federal government and specifically designed to encourage entrepreneurship, often sporting low rates and reasonable terms.
Of course, it is important to recognize that the approval time for SBA loans can be quite long, and will typically require extensive paperwork and documentation.
Asset-based loans are a class of loans that are lent based on the value of an asset put up as collateral. That asset might be property, inventory, a vehicle, or something else of tangible value. These types of loans can be a useful tool for a new small business, and a way to raise needed capital.
Asset-based loans tend to be permissive about use, and fairly quick to acquire, so long as you have something of requisite value to put up. Beware, though, that default can lead to the seizure of an often-valuable asset.
Lines of Credit
Lines of credit can also be an immeasurably useful type of small business loan for a new entrepreneur. Like a credit card, a business line of credit extends cash up to a given limit. Lines of credit can be secured (backed by collateral) or unsecured, and tend to be pretty unrestrictive. Cash can be drawn as you need it, when you need it.
For these reasons, lines of credit are a great backup option for times when needed expenses arise. Regular repayment can also help build up your business’ credit score. While lines of credit are not ideal for large expenses, they can be very helpful for other needs.
Ultimately, many types of business loans have a role to play in the creation of a new small business. The options above may suggest some ways to get started as you work to fund a new enterprise.