As the economy comes out of the slump produced by the COVID-19 pandemic, people across the country are changing their lives and re-prioritizing their careers and the future. If you’re one of these people and are trying to start a business, you probably need funding. There are a variety of ways to get money to start your business, but it’s important to invest enough to expand the business and create the optimal environment for profit. If you need money to get off the ground, here are five loan options to fund your business and get started.
Personal Loans
If you want to take out a loan but don’t want to use a business loan, for whatever reason, there are options when you need money. There are two different types of personal loans, which are secured and unsecured. A personal loan company can offer secured loans that require a high credit score or collateral.
If you have a good credit standing, taking out a personal loan may provide a lower interest rate than if you apply for a business loan for a bank. This depends on your score and how much the lender likes you and your business idea, but it should be kept in mind that personal loans can be used for business expenses.
Cost-Plus Loans
Banks use models to determine the interest rates of their business loans. This is called the cost-plus loan pricing. With the cost-plus model, there are four components for you to determine the interest rate, which include funds that the bank can use for you to borrow, service fee charges, specific risk fees, and the percentage of profit they could make. These types of business loans are dependent upon a lot of factors, which make it a dynamic way to fund a business.
Term Loans
The most common form of small business loans is the fixed term option. This is when a sum of cash is paid to you and you repay it over a specific period of time, otherwise known as a term. Monthly payments are based on the interest and principal balance. Term loans are flexible and can be used for a variety of business needs including day-to-day expenses, payroll, equipment, and more. While there are specific equipment loans, the capital is only provided for that purpose. The equipment will also be collateral should you fail to pay the loan back on time, but term loans can be used for anything.
Small Business Administration (SBA) Loans
SBA loans provide a low-cost loan that is backed by the government. It has a long application process that may delay when you receive the money. While it can take up to three months to get approved and receive the money. Still, if you don’t need funds quickly, SBA loans are a great option because they have low interest rates and offer a high balance you can borrow.
Business Credit
Just like any other form of credit, business credit lines provide borrowers with a limit and interest rates based on when you pay the money back. When you don’t know exactly how much money you will need and want to keep funds coming in and going out, there are plenty of options to open a business line of credit. A term loan requires you to pay interest on the entire loan, but business credit only incurs interest on the balance that you take out.
Are you trying to start a business? Have you gotten started and need money to expand? Luckily, there are a variety of options when it comes to business funding. Between credit, bank loans, personal loans, private loans, and others, you will be able to put money back into your business to help you thrive. Whatever your budget and however much money you need to get things done, there are plenty of options to get your business moving and growing.
When you need money for your business, the above loans can help you get where you need to be. Of course you should pay back the money you borrowed as soon as possible, but business loans can give you some room and relief to progress and follow your business dreams.
