With plenty of options at hand, it becomes quite difficult for a business to find the right type of source to fund the activities.
It all seems too simple when you come across a big list of investors and lenders who promise to fund your business activities.
But the reality is, it isn’t a piece of cake…
In most of the cases, a business owner tends to seek help from close associates such as family members and friends, but often ends up forming a partnership with someone who could fund the business. The latter is a cumbersome process and yet something that isn’t quite definite in the long-run. To its contrast, comes the traditional lenders who offer business loans to businesses based on their repayment capacity and other certain parameters. These lenders, obviously have different operating mechanisms, but it’s better to know who is offering what so that you can design your business roadmap accordingly.
If it’s the traditional business lending you’re looking forward to, then here are the 2 major types of purpose-built business loans you can avail:
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Working Capital Business Loans
These are short-term business loans specifically meant for business owners who want to inject additional capital for expanding their businesses further. They are also borrowed for the sake of netting-off normal day-to-day business expenses such as salaries, purchases, rent and etc.
The Pre-Requisite: Similar to personal loans, a working capital business loan require you to have an established credit score. There are a lot of other paperwork formalities, and above all, the estimated time of approval is not guaranteed. It can take up to 3 weeks or even months for a working capital business loan to disburse.
Where to Apply: The local Banks offer these types of business loans. Alternatively, you can consult your local credit union to apply for these loans.
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SBA (Small Business Administration) Loans
An SBA loan is provided and regulated by the Government and it is specifically aimed to cater to small private businesses. It is a secured form of business lending, which means you as a business must provide a definite collateral to avail it. The most common type of business funding through SBA GOV is the CDC/504 loan program. This loan program is designed for business owners who want to expand their business units. Usually, small businesses tie up to this loan program with a fixed-interest rate spread over a long repayment tenure.
The Pre-Requisite: Unlike non-conventional lenders like this business lending institution that provide same-day business loans, the SBA loans are far too difficult to acquire for a business owner. The terms & conditions bound the borrower to a lot of obligations; the most severe being, if at some point, the potential borrower makes little amendment to the operating hierarchy of the business the SBA GOV will not approve the loan.
Where to Apply: You may visit the official SBA GOV website for inquiring about the details regarding the eligibility checklist and other formalities.
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