Business Loans

If you’re starting a business, you might be wondering where to get a business loan. Here’s your complete guide – what are business loans and how do they work?

Are you a small business owner? Are you looking for ways to expand your business organization? Or are you a beginner trying to find your way into the market? Starting or expanding a business can be exciting, but exhausting at the same time. No matter what, you’ll require the assistance of business loans. Ever heard of a business loan? Yes? No? Maybe? In any case, a business loan plays a critical loan in building up your business organization and we’re here to guide you.

What are Business Loans?

A business loan is a type of loan that is borrowed from a lender – any bank or financial institution – for the sole purpose of starting or expanding a business or business organization. A business loan can be secured or unsecured with either a fixed-rate or a variable-rate interest.

But when exactly should you buy a business loan? In case you’re short of savings, or you want to save some money up for future, or you’re unable to find any investors for your business, you can opt for a business loan.

However, while applying for a business loan, you might want to consider the following:

  • Amount of loan
  • Fixed-rate/Variable-rate interest
  • Secured/Unsecured loans
  • Business profit

How Business Loans Work?

Before applying for a business loan, you must learn the basics of how a business loan works. A business loan can be borrowed from multiple sources – banks, online lenders, private financial institutions and so on. However, while deciding a suitable lender for your business, you must consider interest rate as well as the terms for repayment of loan.

The application process for a business loan might be a little too exhaustive as compared to other application forms. Your lender might want to know the exact purpose behind borrowing this loan. Here, you must have a well-prepared business loan explaining your mission, vision and goals. Moreover, you’re required to fill in your personal information as well as your tax returns and credit history.

Now, the repayment terms may differ from one lender to another. Depending upon the type of loan, you may offer an asset of yours as a collateral against the loan. In this case, you’re offered a better rate of interest. However, you can opt for an unsecured loan as well.

What are the types of Business Loans?

It can be a little too complicated for you to find your way in the complex world of financing. But, don’t worry, we’ve everything for you. Here’s our complete guide into the crazy world of banking.

Type 1: Standard Bank Loan

For borrowing a Standard Bank Loan, you must have a well-developed plan that is sure to work in your favour, or you must have a solid collateral, or else your application would be rejected. In terms of benefits, these loans have the lowest rates of interest.

Type 2: Small Business Administration Loans

Small Business Administration ia a federal agency that offers these loans. However, they, too, require an application that needs to be approved by the SBA. These loans are further divided into two categories as follows:

  1. General Loan

If you apply for a general loan, SBA guarantees around 85 percent of loan below 150,000$ and around 75 percent of loan above 150,000$.

  1. CAPLines Loan

CAPLines loan is designed in such a way that they offer immediate and short term relief to small business organizations. In case of a CAPLines loan, SBA guarantees an amount of around $2 million.

CAPLines loans are divided into five sub-categories as follows:

  • Seasonal line of credit: A loan offered to invest in workforce as well as inventory.
  • Contract line of credit: It is designed to fulfill contract obligations of a business.
  • Standard asset-based line of credit: It offers finance to organizations that lack in acceptable credit history.
  • Small asset-based line of credit: A loan offering an amount of 200,000$ with lesser application requirements.
  • Builder’s line of credit: A loan offered for renovation to construction organizations.

Other Types of Business Loans

In case, none of the above mentioned loans suit you or your business organization, there are some other business loan alternatives available for you. Here are a few instances:

  • Equipment financing: An equipment financing loan offers money for purchasing large and heavy equipment. However, the equipment you’re purchasing is held as a collateral against the loan.
  • Invoice financing: This type of loan can be borrowed by selling some accounts to the lender in exchange for cash.
  • Short term business loan: It is a short-term business loan that can be repaid in little time with a high rate of interest.
  • Merchant cash advance: this type of loan provides you with cash in exchange for credit card sale in the future.

An Overview of Best Business Loan Lenders

In case you’re not sure where to look for to start or finance a new business organization, we’ve compiled a list of best business loan lenders for you.

LenderLending typeLoan minimum/
maximum
Lowest listed rateRequired annual incomeRequired years of business
LendioLending marketplace$1,000/
$5,000,000
6%$120,0006 months
KabbageDirect$2,000/
$250,000
N/A$50,0001 month
OnDeckDirect$5,000/
$500,000
9.99%$100,0001 month
AccionDirect$300/
$1,000,000
N/AFlexibleN/A
Funding Circlepeer-to-peer$25,000/
$500,000
4.77%
Flexible
2 months