Business loans are a great tool to fulfill the financial needs of your business. Always keep in mind that you need to maintain a good credit score. To do this, you have to be a responsible borrower. Manage your finances well, so that you don’t miss your deadlines.
Here are the three types of business loan programs that you could choose for your business.
Revolving Business Loan
Revolving business loans involve two types of accounts. These are the Line of Credit and the Business Credit Card. With revolving business loans, you will receive a Line of Credit and a Business Credit Card as soon as you open an account. You can use the Line of Credit and the Credit Card provided anytime you need it. Every time you use your credit card or draw from your line of credit, the amount is deducted to the total credit given to you. Upon payment, the amount will be added to the total funds available for credit.
This loan program is suitable for smaller business loans because businesses can easily borrow and repay their loan instantly.
With the non-revolving type of business loan, you can no longer use your line of credit for reborrowing once credit has been consumed.
That’s the only difference between the two.
The most typical type of loan is the installment loan. In this loan program, the lender provides the full loan amount to the business. There will be fixed monthly payments that the business shall fulfill. The interest rate will vary and is highly dependent on the payment terms that the business and lender agree upon. This loan program is suitable for borrowing large amounts of funds.
Cash Flow is a type of loan program that is similar to Installment Loan. The lender provides the full loan amount to the business. However, payment terms will be different. There will be no fixed monthly payments to fulfill. The repayment will be based on the cash flow of the business. Lenders will analyze the historical data of your cash flow to calculate what the payment cycle will be for your loan.
With regards to repayment, a business may opt to give a percentage of their income to pay their loan. Another type of repayment option could be Invoice Financing. This is a way to take out a loan based on the future revenue of your business. This helps businesses improve their cash flow while waiting for the payment of their customers.