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What Are the Different Types of Business Loans That Exist Today? 

A recent survey revealed that almost 50% of small business owners have taken out business loans to protect themselves against inflation. They’ve received all types of business loans in an effort to keep their small businesses afloat.

If you’re a small business owner that’s trying to improve cash flow right now, you should consider taking out one of the many types of business loans. A business loan can help you with your cash flow management efforts and put your business in a position to succeed.

Here is a quick breakdown of the most popular types of business loans. We’ve also included a few cash flow tips that you can use to keep your business moving in the right direction.

Term Loan

Of all the different types of business loans on this list, this is the one that you’re likely most familiar with as a small business owner. It’s the most common type of business loan around.

With a term loan, you’ll get your hands on a certain amount of cash upfront. Then, you’ll be required to repay that amount with interest over a specific period of time.

You might have trouble obtaining a term loan if you’re starting a new business from the ground up and don’t have any collateral to offer. But if you’re trying to expand an existing business, this might be the perfect type of business loan for you.

SBA Loan

The Small Business Administration, or SBA, routinely helps small business owners get access to what are called SBA loans. These types of business loans are given out by banks and lenders, but they’re guaranteed by the SBA.

It’s not always easy for small business owners to qualify for SBA loans. But if you’re able to do it, you can get a very low rate on an SBA loan and take your time while paying it back.

You aren’t going to be able to secure an SBA loan quickly in most cases. It can take weeks, if not months, to get approved for one. But it would be worth looking into trying to get one if you aren’t in a huge hurry.

Equipment Loan

If you’re interested in taking out a loan so that you can buy equipment that your small business will use, an equipment loan might be your best bet.

Prior to giving you an equipment loan, a lender will take a look at how long that the equipment that you want to buy is expected to last. They will then use that information to come up with the repayment terms for your loan.

From there, your equipment will serve as collateral for your equipment loan. If you ever fall off track when it comes to repaying an equipment loan, a lender will have to right to take ownership of the equipment to recoup their losses.

Invoice Financing Loan

As a small business owner, you’re going to have unpaid invoices on your books all the time. Your customers will typically have somewhere between 30 and 60 days to get these invoices squared away, which will leave you with a steady stream of unpaid invoices.

Believe it or not, you might be able to use these unpaid invoices to your advantage. You can utilize them to try and qualify for what is known as an invoice financing loan.

So, what is invoice finance? Well, it’s a type of business funding that makes it possible for you to manage cash flow by obtaining cash while using unpaid invoices as collateral.

You can have a lender send you cash immediately. And you can repay them over time once your customers start to settle their unpaid invoices.

Merchant Cash Advance

Most of the other types of business loans on this list are going to be much better options than merchant cash advances. But if you’re ever really in a bind, you might want to look into taking out a merchant cash advance.

A merchant cash advance will allow you to get cash that you can put directly into your pocket for business expenses. But once you have it, you’ll be called on to set aside a portion of your credit and debit card sales to repay the loan that you took out.

It’s not an ideal type of business loan. But it can be effective for those who don’t have many other options.

Personal Loan

When you’re first trying to turn yourself into a small business owner, you’re going to struggle to convince lenders to take a chance on you. Even if you have what you think is a foolproof business plan, many lenders are still going to be skeptical.

If you ever run into this problem, you might be able to use your own personal credit score to take out a personal loan. It’s a great option for those who are trying to get startup companies off the ground.

Microloan

If you need to try and obtain a relatively small business loan—think less than $50,000—there are many non-profit organizations that might be willing to set you up with a microloan.

Microloans obviously aren’t going to stretch very far. But they’ve become the perfect solution for those attempting to build small businesses from scratch. They’re particularly effective for those who live in disadvantaged communities.

Not everyone is going to qualify for microloans as there are stringent requirements attached to them. But you might want to at least look into trying to get one before writing off the idea.

Which of These Types of Business Loans Would Work Best for You?

As you can see, there is no shortage of options when it comes to the different types of business loans. There are so many kinds of business loans for you to choose from.

You should give some serious thought to which types of business loans would be your best option. It’ll help you pick out the business loan that will work wonders for your company.

Get more cash flow tips for small business owners by reading through the other articles posted on our blog.

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