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Small Business Finance: What Small Business Loans do You Qualify For?

Small Business Financing

The Covid-19 pandemic has had such a huge impact on small businesses in the US that 90% of them have lost revenue since it started. At this point, about 84% of small businesses are afraid they may have to close down. To prevent this, most of them are turning to small business finance loans to stay afloat or boost their businesses to avoid shutting down.

If you fall into this category, then you’re possibly in the market looking for the type of small business finance loan you qualify for. Now, there are six aspects your business lenders will look at to gauge whether you qualify for a small business loan. These includes your industry, time in business, debt load, credit, collateral, and cash flow.

This guide will make it easier for you to understand what small business loans you qualify for.

How To Get a Small Business Loan

The first step is to decide why you need financing, which can be anything from managing day-to-day expenses, growing your business, or getting a safety net. Your reason will play a significant role in the type of business loan you qualify for. Additionally, your length of time in business will determine what kinds of loans you can get.

For instance, if you’re just starting out, getting a loan from a bank or an online lender is virtually impossible. If you have been in business for over a year, then your options expand, and you can qualify for several types of small business finance loans.

Compare Lenders

There are several types of lenders you should compare.  They are are banks, online lenders, and non-profit microlenders. Online lenders are a good option if you have no collateral and need funding fast. They mostly offer small business loans and lines of credit, and the amount you get will depend on the type and size of the loan you want, your credit history, whether you have collateral or not, and the length of the repayment period.

Opt for banks when you have collateral to offer, good credit, and are not in need of the cash quickly. Most small businesses have a hard time getting approval for bank loans due to various factors such as cash reserves and low sales volume. Still, one of the best things about banks is they offer the lowest APR.

Microlenders are a good option when it’s impossible for you to get traditional loans if your business is too small. These lenders offer short-term loans, but you can expect a very high APR.

Do You Qualify for the Loan?

Essentially, there are some basic questions you need to answer to determine whether you would qualify for a small business loan. These questions include what your credit score is, how long you have been in business, whether you make enough money, and whether you can afford to make the payments.

Different Types of Small Business Loans

Once you get into the small business finance market, you’ll quickly realize how complex it is. There is a wide array of loans available, all of which cater to different needs, and tons of lenders, all of whom check for different requirements. Let’s Look at the different types of small business finance loans you may qualify for.

Term Loans

Term loans are some of the most common small business loans. You can get them from both online lenders and traditional lenders, and you receive a specific lump sum of money and pay back on a set schedule. The payments are usually made every month and given they are amortized, you’ll get to pay the same amount every time.

Repayment starts immediately, so only take this loan if you can use every penny of it and utilize it to help you make the payments. You should also be sure you can make the first repayment immediately. This loan is suitable for business growth and large one-time purchases like real estate or equipment.

Business Lines of Credit

Have you ever heard of open-ended loans? A business line of credit is a revolving loan, which means you can withdraw funds, repay them, and withdraw again. These are similar to credit cards because after approval, you get a credit limit and you can withdraw anytime as long as you don’t surpass that limit.

One significant benefit is you only pay interest for the amount you withdraw. This loan is suitable if you need seasonal spending, to pay for unexpected expenses, or to solve cash flow problems.

Small Business Administration Loan (SBA)

The SBA is a federal organization that offers government-backed low-cost loans. Now, you don’t go to SBA directly because it works with banks and other non-profit lenders, and once you qualify, you’ll get better terms and lower rates. An SBA loan is most suitable for working capital, business growth, or debt refinancing and Signature Bank of Georgia is a preferred lender approved to offer SBA loan products under SBA’s Preferred Lender Program.

Short-Term Business Loans

Short term business loans are exactly that, which is why they are considered low risk. These are best for new businesses or borrowers with low credit as they come with one fixed fee rather than interest rates. If you need cash fast or emergency funding, a short-term business loan is a good option.

Equipment Loans

Equipment loans are used for business equipment, machinery, or vehicle purchases. What you purchase stands as the collateral for the loan. These loans are typically easier to qualify for as most lenders allow 80% to 100% financing, and you get relatively low rates.

Invoice Financing

This is one of the best options for cash flow problems brought about by unpaid invoices. You can sell your unpaid invoices and get cash upfront, then the lender will wait until your clients make payments. This type of small business finance loan is suitable for startups and businesses with poor credit scores.

Personal Loans for Businesses

If you lack the right documents to apply for a traditional loan or have a low credit score, a personal loan for business can be a great option. You get to use your own personal income documentation and credit score to get financing. However, this is suitable if you have a strong personal credit score to qualify for enough money.

Business Credit Card

This is another revolving line of credit, and you can use it to finance your everyday expenses. You may also get savings in the form of sign-up bonuses, reward programs, and cardholder benefits.

Assessing What Type of Small Business Loan You Qualify For

With all these variables to consider, now you know what type of small business finance loan you qualify for and where to get it. Running a small business can be quite expensive, and it’s understandable if you’re in search of financing. With all these loans available, evaluate all lending options and what you stand to gain before you choose the right one.

Now that you have all the information, if you’re looking for a small business loan or more information about it, please contact us today, and we’ll be more than glad to help.

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