Different types of Small business loans and financing

Small business owners often struggle to meet their financial needs as they look to expand and grow their businesses. Consequently, they resort to a wide range of small business loans and financing options to fund their business goals.

Before business owners start to fill out applications, it is imperative that they understand the small business loan landscape, which includes the available financing options, the popular ones, and how they work. 

Types of Small Business Loans 

There are several financing options available to entrepreneurs as they look to fund their small business. Below are some of the very common options.

SBA Loans

Small Business Administration Loans, or SBA Loans, are partly guaranteed by the government which makes them some of the best options available for small business financing. The SBA partners with banks, credit unions and other lenders to provide financial aid to small business owners.

The SBA offers different plans to suit the diverse needs of businesses, including buying inventory, paying debts or mortgages, expanding your business, or even for buying real estate. Some of the benefits of financing with SBA loans include simple repayment plans, flexibility, often, lower interest rates than term loans you access directly through a bank. 

Conventional Term Loans from a Bank

Typically, banks see small businesses as a ”risky” investment, and a large majority of applicants are denied. However, conventional term loans remain an option and some businesses do get approved for term loans from banks.

Due to the strict approval process, it is very tough for small business owners to get approved for a term loan from a bank.

Business Credit Cards

Business credit cards can provide small business financing more quickly than a loan, and they make a lot of sense for certain purchases. They can be used to purchase anything and make timely monthly payments.

Business owners who do not have collateral or a strong enough credit history to acquire term loans can rely on business credit cards for quick financing.

Other financing options available to small business owners include Merchant Cash Advance, Invoice Factoring, Lending Marketplaces, and Online Lenders.

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