4 Common Types of Business Loans

Cristopher Centers

If you own a small business, you know how important cash flow can be to regular operations. Whether it’s a slow season, long invoice turnover, or the occasional extra expense, a lack of liquidity can be a real problem for businesses of any size.

Luckily, there are lenders ready to help with a number of different loan products available for any business. The trick is knowing what type of loan to look for and where to find it. These 4 types of business loans are common enough to find at most lenders and cover a range of needs.

1. Invoice Financing

If you’re a business that has outstanding invoices with long paydown times, you should consider this type of loan. You can use those outstanding invoices as collateral to get cash fast and pay down the loans on the collection of the invoices.

It is a nice alternative to selling outstanding invoices as your customers won’t get collections calls or even know their invoices have been financed as you’ll maintain control over your incoming assets.

2. Equipment Loans

These business loan products are tailor-made for businesses that need to purchase large equipment. They are built to finance those purchases and are often designed to match the term of a loan to the life of the equipment.

When making an equipment purchase with these loaned funds, you (rather than a lender) will be the outright owner of the equipment allowing you to build company equity moving forward. The equipment itself can act as collateral, though you should expect interest rates to align with your credit history.

3. Term Loans

If you need a large sum of money and have some collateral available, you may want a term loan. These are very standard loan products and work just like your home mortgage. You can access large amounts of money, typically reflecting your available collateral and credit history, and you’ll have a defined term over which to pay the loan off.

These loans are usually reserved for businesses that are looking to expand or take large growth steps.

4. SBA Loans

If you are willing to go through the long application and approval process and wait months for funding, SBA loans are great. They are typically reserved for large amounts and work much like typical term loans. The difference is that these loans are backed by the Small Business Administration.

Because of that backing, interest rates can be extremely low, amounts can be quite high, and repayment terms can be extended. These loans are great products if you can qualify, though it is a difficult process.

Businesses often need funding for a huge range of reasons. There is a loan product that matches each of them. Do your research to ensure that you can get the right type of loan to best meet the needs of you and your business.

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