Lite
Small businesses sometimes need additional funding in order to achieve growth objectives. Finding the best loan solution depends on your specific needs and it is crucial that you are aware of all available loans options.
Conventional loans are typically offered by large commercial banks with stringent requirements for their borrowers, although other sources such as online lenders and lending marketplaces also exist.
Working Capital Loans
Working capital loans can be an invaluable source of funding for your small business, but it’s essential that you know exactly what’s involved before entering into any agreement. Like with all forms of finance, working capital loans have their own set of regulations regarding application, approval and funding that vary based on type of funding source, lender and eligibility requirements of each business owner applying.
Working capital loans are designed to cover daily business expenses during times of low income or seasonal slowdown, including payroll costs, utility payments and purchasing inventory and supplies. They come in the form of term loans, lines of credit or Small Business Administration (SBA) loans.
Many online business lenders provide fast, flexible working capital loan options with fast approval times and funding typically within days. Other providers may provide more traditional lending experiences with longer application and approval processes and requirements for both personal and business credit checks as well as industry experience.
Other alternatives to working capital loans may include merchant cash advances – though not always accessible to startups – and the Small Business Administration 7(a) loan program, though keep in mind these may come with high fees and even negatively affect your credit score.
Before making an application for a working capital loan, it’s essential that you carefully consider all its pros and cons. By planning ahead, however, you can quickly locate a lender offering suitable working capital loan terms tailored specifically to your business – instantly compare financing options with Nav!
Lines of Credit
When your small business requires working capital, the best way to secure it is through a line of credit. Unlike term loans which come as one lump sum payment, a line of credit enables you to withdraw up to your predetermined limit on a revolving basis with only interest on what was borrowed being due at any one time. Lenders offer both secured and unsecured lines of credit with different availability periods, borrowing amounts, fees and interest rates – providing your business the flexibility it needs for operation.
To qualify for a line of credit, you will require an effective business plan and detailed financial statements that demonstrate your ability to repay it. As collateral may also be required of you, lenders will evaluate your profit-and-loss statements and other metrics in deciding if or not they fund your business; some lenders may even deny loans to volatile industries like food service.
Your business lines of credit may come from banks, credit unions and online lending marketplaces – each one may require differing qualification criteria and documentation requirements to get approved. Traditional bank lenders tend to have stringent qualification standards when compared with non-bank online lenders, such as Funding Circle’s minimum credit score requirement of 660 with six months revenue/profit data requirement for approval. It is wise to research each lender you consider carefully so you know they meet your business’s needs.
Short-Term Loans
Short-term loans provide businesses with immediate cash needs with fast funding solutions. Their repayment terms typically have shorter repayment schedules and higher interest rates compared to standard loans; individuals should only seek short-term lending as an option when none other are available, such as credit cards, bank overdrafts or trade credit. Many lenders now offer online applications and approval processes so applicants can have funding within days after submitting an application; most short-term lenders do not require personal guarantees or collateral and are usually easier to qualify for than long-term loans.
These financing opportunities can provide short-term funding needs, like purchasing materials or covering an accounts receivable snag, while still meeting long-term business goals and challenges. When selecting financing solutions tailored specifically for small business, work with lenders who understand your industry to find a loan tailored specifically to you and your goals.
When looking for short-term financing, be sure to work with lenders that do not charge high upfront fees or prepayment penalties such as Lightstream, SoFi or Upstart who do not impose such penalties for early payoff. Furthermore, ensure the application process doesn’t negatively impact your credit score so that funds can arrive quickly.
Borrowers looking for short-term financing should prioritize direct lenders as these tend to offer more flexible repayment schedules and lower interest rates than other forms of borrowing. Furthermore, direct lenders generally do not use third-party credit brokers who may delay processing your application; this factor alone could make all the difference in whether or not your application for funding is approved; many lenders such as SBA Loans and LendingClub Bank provide free online applications and faster processing to ensure you can obtain funds as soon as possible.
Long-Term Loans
Long-term business loans provide small businesses with an effective financing option to make more substantial investments over several years, usually at reduced interest rates and longer repayment terms than short-term solutions. They can be used for anything from new equipment purchases to commercial real estate purchases – however, due to the longer term length, overall costs could become higher as payments spread out over more time.
As the name implies, short-term loans are designed to meet more immediate financing needs such as unexpected demand or new opportunities that arise quickly. They’re often available from alternative lenders with more relaxed loan requirements compared to traditional banks – including lower credit score requirements and shorter minimum loan amounts; and typically feature faster approval processes and flexible repayment schedules than their bank counterparts.
Short-term loans are one of the most efficient and popular means for small businesses to raise outside capital. By borrowing and repaying over an agreed-upon term, small business owners can retain full control of their company instead of resorting to seeking private investors or issuing shares, both of which could potentially dilute ownership shares and limit control over decisions related to company operations.
Short-term business loans typically feature smaller loan amounts and more frequent loan repayment obligations (weekly or daily), typically with collateral requirements or documentation requirements such as bank statements, tax returns and revenue projections for approval.
Refinancing
Refinancing business debt is an option that enables you to switch the balance of an expensive business loan or credit card into one with lower rates and terms, potentially lowering monthly payments and freeing up cash flow to expand your company. Done properly, refinancing can lower monthly payments while opening up cash flow for expansion purposes.
Refinancing can vary depending on which lender is chosen, but generally involves filling out an application and fulfilling eligibility requirements. You may also need collateral or personal guarantees depending on what type of loan is desired and its policies.
Interest rates, fees and terms offered by lenders can differ widely, making it essential to shop around for the best deal. Many online applications provide funding in as little as 24 hours; however these lenders often carry higher interest rates than traditional banks with no customer support available in-person. Peer-to-peer lenders provide financing through matching investors with small businesses seeking loans; these tend to have more flexible eligibility criteria and often come with quicker approval processes.
Refinancing may not be appropriate for all businesses, particularly in their initial stages. When considering refinancing options for your company, it is important to carefully assess your goals and financial situation in order to decide if refinancing makes sense for you. For instance, if your business has grown substantially since taking out its original loan debt, refinancing with more favorable terms and rates might make more sense than continuing paying off what you currently owe – particularly as certain loans may come with prepayment penalties that negate benefits of refinancing; loan calculators can help compare costs when making this decision for you and your company.
