Are you struggling to pay your upcoming bills? How about wondering how you will afford to upgrade the equipment in your business? What if I told you that both of these problems could be solved by taking on more debt?
Many business owners get stuck on the stigma of business loans that they forget the advantages and opportunities a business loan can provide for them. Understanding the different types of business loans, the benefits, and how to secure a loan should be a top priority as a business owner.
What are the Different Types of Business Loans?
There are a few different types of business loans, each with different advantages and disadvantages. The first type is a credit card. A credit card is a form of short-term financing with payments being due each month. This is a great option for businesses that make frequent small purchases or have multiple employees buying items for the company. Nevertheless, interest rates are generally high with this form of financing.
The next type of business loan is a line of credit. This loan type allows businesses to continuously draw on the line as long as the overall maximum borrowing limit is not reached. A line of credit offers flexibility in payments as there is no set repayment schedule, but interest is generally higher compared to a term loan.
The final type of business loan is an installment loan. This loan type is for a fixed amount with a set repayment schedule. This loan type generally has the lowest amount of interest but provides the least flexibility as payments must be made each month regardless of cash flow.
What are the Benefits of Business Loans?
Business loans provide many different benefits, from added flexibility to growth opportunities. Having the ability to draw on a line of credit when money is tight or finance equipment through a term loan provides significant flexibility for business owners, all without having to drain the checking account. The ability to purchase more efficient equipment boosts productivity and profitability. In addition, business loans build credit. Lenders and investors both rely on credit when deciding to lend or invest money into your business.
How to Secure a Business Loan?
Securing a business loan doesn’t have to be an overwhelming process. In fact, many business owners are able to secure a loan within a few days. Credit cards are the easiest loan to apply for with online submission being common. On the other hand, a line of credit or term loan requires the help of a banker to facilitate the process. Many businesses choose to secure a loan from the same bank their checking account is at; however, this is not a necessity.
Summary
A business loan provides business owners with a plethora of benefits, including the deductibility of interest on the business tax return and the promotion of effective cash flow management. To decide on which option is right for you, reach out to the team at Gordian Financial. They would be more than happy to discuss your situation and find the right loan type for your needs.
