Operating a business takes money and almost everyone has heard the expression you have to spend cash to make money, but where do you get the money if you aren’t independently 中小企貸款 wealthy, or established? A business loan is the answer to most business needs. Whatever size a business is, almost every business owner at some point has to look at a loan. A business loan can help a business get started, expand once it’s returning and growing, or get a business through the tough spots that happen occasionally. Deciding on a business loan is a key step, but which loan is right for you and how do you decide between the many different various types?
Skip the Loan and Use Plastic
Some business owners opt for a slight variation on a business loan and choose to use credit cards to back their startup, expand on an existing business, or help their business using a tough stretch. The positive reason for using credit to fund your business is that it is often safer to get, or already existing in a personal credit card, but a large couple of serious downsides to using this type of business financing. The first negative is that unless your existing credit line is unlimited there might not be enough funding on your credit cards. The second negative to using personal credit cards is that your personal and business cash flow is not separate. This can create damage if you need to use your credit for important personal needs and it can have a similar effect on business funds if you suddenly have to take advantage of your credit for personal reasons. Lastly, the interest rate on credit cards is generally greater than any of the various types of business loans.
A Bridge Between Credit cards and Business loans: Lines of credit
A personal credit line operates quite similar as a credit card. You apply for a business loan personal credit line and based on your qualifications you are approved for about a percentage. You are not charged on the loan unless you actually use the money and are only charged for the amount you actually use. Another similarity between lines of credit and credit cards is the loan is often an unsecured loan meaning no assets are used to make sure the loan such as homes, cars, the business itself. However, unlike a credit card business lines of credit have interest rates much closer to a traditional loan level.
On the downside those interest rates are usually variable like a personal credit card and surge or down over the period of the loan. Another downside to lines of credit is that like a credit card your repayments ought to be only a little more than the ir each month.
This may seem like a plus at first because the monthly bills are so low. The catch there is that lines of credit to not extend forever. There is almost always an established number of years for the loan amount to be available. At the end of these time (and sometimes within the last two years of the payback) money is not longer available. After that period, the payments are higher to make sure the money is very reimbursed by the end of the loan.
If you have the discipline to make yourself pay more than the minimum every month in order to pay down the loan, this can be a good loan to get. It allows for times when money is tight. You can pay the minimum at those times without risking a default on your loan.
Traditional Types of Business loans
Even if you do not have an extensive amount of credit, and if you don’t think a personal credit line is right for you, all is not lost. There are many more traditional sorts of business loans to choose from:
: Working Capital Loans: These loans are what most people think of when they consider getting a business loan. They come in two types, secured and unsecured. Unsecured versions of working capital loans are usually only available to those business owners with stellar credit, a sound business plan, and an established business with a proven track record. Startups are usually too risky to be granted unsecured working capital business loans. Secured working capital loans are a little safer to get although the amount of collateral needed to obtain these loans is often based on the credit of the borrower. These loans allow different types of business to conduct their affairs on a day-to-day basis with available cash. Loans are typically secured with homes, and other valuable assets.
: Accounts Receivable Loans: These are short term types of financing available when you hit a hardcore spot and now you have money priced at a particular time. Your company records of accounts receivable act as a security for such loans. On the downside the interest rates of these short term loans are usually higher than a long term standard loan, and you can end up in a vicious circle of using your assets (receivables) before you get them and then don’t you have money left before your next income period. This type of loan should only be regarded in a select few types of cases of emergency such as the need to meet payroll, purchase inventory at a value, or other necessities.
: Business Only Loans: This type of loan is sent applications for using the capital and assets of the business alone and not any personal credit or credit history of the owner. It is only available to a business with a solid record of reliable income, the long-term prospect of fluid operation, and very strong business credit scores.
Other Function Specific Loans
Fees during business operation when you need a loan for a specific type of purchase such as to buy new or replace old equipment, the purchase of real estate for the business, or other dedicated needs there are loans designed to be separately available for just those times.
Getting the Loan
The best way to ensure success in getting your business loan is to be prepared. Enter your bank with a well-formulated business plan at your fingertips and make sure your credit is properly. If you know of any spots on your credit history, be prepared to explain them. Lenders are human too, and know that there are situations that are mandatory but if you can prove your trouble is in the past and you are on more solid a foot-hold it will help a lot in getting the loan you desire. Letters of explanation to get along with your loan package help if there were situations such as illness, or caring for a sick loved one that caused problems in the past.