The first step to finding the right type of business loan is to understand the various options available to you. There are several types of business loan you can access, so it is important to understand them before you can pick the one that suits your needs. Requesting a loan for your business has become quick and easy. all you have to do is apply for a business loan online.
Once you have evaluated the type of business loan you need, you are presented with two options. The first option is an unsecured loan and the second is a secured loan. Decide which of these two loans you better. Taking an unsecured loan can result in higher interest rates, but it protects any assets you possess. If your business has a good credit score, proceeding with an unsecured business loan is recommended.
If you are having trouble assessing which type of business loan you currently require, here is a list of some of the most common business loan types you can apply for:
Types of Business Loan
Term Loan: A term loan is a lump sum of cash offered by a lender under specific borrowing terms. Terms loans are normally used by a small business to purchase fixed assets, such as equipment or a new building. Term loans offer flexibility and lower interest rates and are a good option for a business loan.
Start-Up Loan: A start-up loan help can help you get your business up and fully functioning. Along with the business’s credit score, a lender will need to access your personal credit score since your company is in a nascent stage. Note that your business needs to be established for a certain amount of time before you can apply for a start-up loan.
Working Capital Loan: A working capital loan is suitable for small businesses lacking the capital to pay for daily operations. Working capital loans also come in handy for seasonal businesses that may require extra capital to meet circumstances during peak season or off-season.
Loan Against Property: A loan against property is a secured loan, in which a small to medium business offers property collateral to receive a larger loan. The loan amount received in this type of business loan generally exceeds Rs 50 lakhs. Lenders are normally willing to finance a loan up to 70% of the attached property’s value. This type of loan is a long-term deal with a tenure period of 15 to 20 years.
Equipment Loan: An equipment loan is a great way to finance any additional equipment or technology your company requires. An equipment loan is easy to apply for and obtain, and having the latest equipment can give you an edge over other small businesses in the field. An added benefit of an equipment loan is tax benefits.
These are some of the most types of business loans you can apply for. There are other options you can explore, such as invoice financing, loans under government schemes, and business loans for women. Once you have selected the type of business loan you need, you can follow the pointers below for a successful business loan process and experience.
Pointers To Keep in Mind
- Ensure your business is eligible for a loan via a good credit score. If your business does not have a good credit score, see what steps you can take to increase it. Additionally, calculate an EMI, interest rate, and tenure period that fits within your budget. Misjudging the financial burden caused by a business loan can place further financial strain on a company.
- Assess your loan amount correctly. A business loan in excess can drive up EMIs and interest rates. Also, it can lead to a waste of funds. Acquiring a business loan below your requirement can result in your business needing an additional loan. An additional loan could come at a higher interest rate that jeopardizes your business’s financial stability and your reason for taking the loan.
- Find a loan and lender that fits your requirement in terms of processing time and disbursal. If you require the loan urgently, then find a lender who is willing to approve and provide funds quickly. A way to secure a loan in a fast and efficient manner is if you apply online for a business loan.
Conclusion
There are several types of business loan you can apply for. Within the types, there are two types of loans on offer, these are secured loans and unsecured loans. Finding the loan most suited to your business needs and will allow for maximum growth. Once you have assessed your needs, ensure that you are eligible for the loan you picked. Improve your credit score or provide collateral under a secured loan. Ensure you have correctly assessed the loan amount required to fund your business. If you require a loan in a short amount of time, apply for a business loan online.