If you are serious about running and expanding your business, a business loan is something you have thought about. It can help you purchase necessities for your business operations and keep you afloat for longer. However, since there are many types of loans out there, first-time borrowers might be overwhelmed and shy away from the process.
Knowing the type of loans available helps you decided what is best for your type of business. There are loans for start-ups and loans for those established businesses looking to expand. Here are the different types of business loans.
A Business Line of Credit
This type of loan allows you to borrow money only when you need to and you’re not going to borrow a lump sum. This is perfect for business owners who like to be strict with their cash flow. This category of loan is most commonly used for basic expenses for operations.
An SBA Loan
Small Business Administration Loans are used for purchasing land, building, or expensive equipment needed for a business. This is a government-backed loan, so banks are more comfortable in lending the money. They are linked to your business assets in the form of collateral as a security measure.
Credit Letter
This is not a type of loan per se, but rather a promissory note written by a bank and sent to other lenders. This helps you in terms of reliability among other lenders. It’s a letter that states that the amount you borrowed will be paid at a specific time. Use this if you plan to borrow from other types of lenders.
Business-Specific Loans
Banks can offer loans that cater to specific types of businesses and if you have a business that requires farming operations, then an Agricultural business loan is the right fit. There also loans that are specifically intended for real estate and equipment needs.
