Small Business Loans: There Are Many Options

10 October 2019
 Categories: Finance & Money, Blog

A small business loan isn't a term with a single meaning. Yes, it's a form of funding for a small business, but there are a variety of categories that make up this funding option. Before you apply for one of these financial products, it's a good idea to know what type of loan you need and qualify for. 

Equipment Loan

An equipment loan functions pretty much as it sounds, in that it is funding intended to help a business purchase additional equipment. The purchase of a bulldozer for a construction firm or an ultrasound machine for a medical office, that the company doesn't have the funds for on hand typically fall into this category. 

In terms of qualifying for the loan, the company needs to first show that they can repay the loan, and, in some instances, the company will need to prove that the addition of the equipment is necessary to help their company grow.

Line of Credit

A line of credit is a loan option that is not as widely relied on, but in many situations is an excellent option for small businesses. A line of credit functions much like a credit card, in that a financial institution will approve you for a certain amount of money to borrow, but you don't have to accept the money all at once. 

So, if your company is approved for a $50K line of credit and you only take out $20k, you're only required to pay back the $20K based on the loan terms. The amount of income your business generates and credit history will determine what amount you qualify for. However, lines of credits don't typically have restrictions on how you can apply the funds. 

Invoice Loan

An invoice loan is another small business loan option many people don't learn about until they open a business of their own. An invoice loan allows you to use your existing, unpaid invoices as a colleterial. This loan is more of a short-term option since you are typically required to pay back the loan as soon as the money for the unpaid invoices is received.

To qualify for this loan, you will have to be a business-to-business company; business-to-consumer organizations don't qualify. You are also typically required to show that the businesses for which you are awaiting payment have a solid history of paying as agreed.

The above are just some small business loans you may benefit from. Research additional options to see what's best for your company's growth and development.