According to statistics, more than 50% of small business startups fail in their first year of operation. The Small Business Administration (SBA) indicates 66% of startups fail within the first ten years. Moreover, only 25% of these businesses are operational 15 years and above later. Most startups cannot survive without adequate funding. Essentially, there are different types of loans you can access to capitalize your small business. When looking for a small business loan, make sure you are applying for the right facility. Below are different small business loans options to consider:
1. Working Capital Loans
These loans are short-term facilities to keep your business running smoothly. You can get working capital loans from banks and other lending institutions. As you look for other ways to increase your business revenues, a working capital loan helps to keep your small business afloat. There are, however, a few downsides with these type of loans: they attract high-interest rates and feature short repayment terms.
2. Equipment Loans
Small businesses require different types of equipment to operate smoothly. However, some of them are unable to purchase all the necessary equipment and machinery. An equipment loan enables a small business to buy the equipment they need and keep their operations running efficiently. Equipment loans are easy to access compared to other types of loans. The loan itself serves as your collateral.
3. Merchant Cash Advances
You can get a merchant cash advance facility based on your business’s total credit card transactions per month. For instance, you can get as much as 125% of your business’s transactions per month. To repay this facility, some lenders will charge a portion of your credit card sales every day. Others will demand a fixed amount from your business’s merchant account. Merchant cash advances are easy to obtain. You repay the loan from your credit card sales. The only dampener is that the interests charged are very high, as much as 30% in a month depending on a lender and the amount advanced. Find more information and learn from the available resources on the Thinking Capital website.
4. Credit Lines
This loan provides a small business with money to meet its daily cash flow needs. It allows you to pay interest only on the amount used and not the total amount borrowed. The loans are unsecured and have a longer repayment term, which allows your small business to build its credit rating, especially if you pay the interest on time. However, the additional fees can become a burden on your small business, especially if allowed to accumulate over time.
5. Professional Practice Loans
These type of loans are set to help small companies provide professional services. These include healthcare, accounting, insurance, engineering, veterinary and architecture. This facility helps businesses with funds to buy equipment, refinance debt, renovate an office, or even buy a practice.
6. Loans for a Startup Franchise
These loans cater to entrepreneurs looking to open a franchise. The loan can be used as working capital, and for buying equipment or building a store.
7. Invoice Factoring Loans
These loans help a small business to pay outstanding invoices. They are ideal for small businesses seeking funding to settle unpaid invoices.
To survive beyond 15 years, your business will require funding to meet its various obligations. Luckily, there are funding options you can consider to keep your small business afloat.