Running a business is no easy feat.
Apart from having to deal with numerous competitors, at one point or another, you’d have to look for additional funding, whether for expansion or to help your venture stay afloat.
While looking for the business loan that will best suit your needs is no rocket science, it can be tricky especially for first timers.
For starters, it’s not enough that you know the SME loan interest rate comparison or the terms of the loan.
You would need to know all the essentials of the options available at your disposal before you can gauge if it is the right fit.
If you are considering getting a business loan, below are some of the options available as well as the basics you need to know about each:
For businesses with substantial cash flow and a robust credit history, bank loans are considered ideal since they often come with lower interest rates compared to other loan options.
However, if you are considering getting a bank loan, it would be wise to prepare collateral and detailed financial information as you will most likely be required to present them.
Also, keep in mind that while local banks often come with easier underwriting for loans, larger financial institutions often provide better interest rates.
If time is a concern, know that application and approval process for bank loans will usually take weeks so this is not exactly the ideal option if you need the funding as soon as possible.
Lines of Credit
Most banks that offer bank loans also often provide lines of credit.
One of the benefits this type of loan has to offer that you can’t afford to miss out on is flexibility.
For starters, lines of credit are deemed ideal if you are looking to fund a necessary business expense or supplementing cash flow so you can take advantage of a particular business opportunity.
Line of credits also make it easier to separate business from personal purchases and to keep track of accounting.
These type of loans are repaid through equal payments paid on a monthly basis, with both the interest and the principal covered.
Installment loans are often provided to meet all kinds of business needs.
Once the contract has been signed, the full amount will be given.
Interest will be calculated from the date the contract is signed until the loan’s final day.
And even if you’ll be able to fully settle your obligation before the final date, no adjustment of interest will be made.
Installment loans can be repaid quarterly, half-annually, or yearly when monthly payments are not feasible.
Some entrepreneurs have used their credit cards to help get their business off the ground.
While highly convenient (easier to apply for and with cash readily available), it’s always not the best option.
Compared to other types of loans, credit cards often come with higher interest rates.
Using a personal credit card can also be very risky.
When the business fails and you won’t be able to settle your obligations in full and on time, you can significantly mess up your credit score.
While it’s not exactly ideal to use your credit card as a primary source of funding, it can be considered as a backup source to address certain business needs.
While seeking additional source of funding for your business is not always easy, it can be done.
When possible, consider getting help from trusted loan brokers so the basics like terms of the loan, payment schemes, SME loan interest rate comparison, etc. will be explained to you thoroughly.