Business funding is never one size fits all, and small business loans aren’t your only option. There are multiple types of business loans you may qualify for to grow your company, and knowing the differences between them can help you make the best choice for your finances.
Let’s look at the different types of business loans and which one that best fits your company’s needs:
Small Business Loans
Also referred to as SBA loans, small business loans are guaranteed by the Small Business Administration. These loans come in many forms, including SBA 7(a), SBA microloans, and SBA CDC/504 loans. Depending on the type of SBA loan, the funds can be used for working capital or to make big-ticket purchases, such as equipment or real estate. Repayment terms depend on how you plan to use the money.
Rates are generally low compared to other loan types. Also, your credit doesn’t have to be excellent in order to qualify.
Merchant Cash Advance
A merchant cash advance is similar to a small business loan in terms of what you can use it for, but the repayment terms are different. Rather than paying back a certain amount each month, repayment is made daily based on a percentage of your credit card sales.
In essence, if you have a high volume of credit card sales, your merchant cash advance will be paid off faster. If you have a low volume of credit card sales, your payments are also lower, but take longer to pay back the advance.
If you need a quick pick-me-up, a bridge loan might be your best option. These are short-term loans that help you “bridge” the gap in between other financing solutions. You can usually obtain funds quickly (about seven days).
What to Consider When Choosing Between Types of Business Loans
Regardless of the types of business loans you’re considering, it’s important to weigh the entire financial picture. Think about the total cost of each loan type and whether their benefits outweigh what you’ll ultimately pay.
Ready to explore your options further? Compare the different business loan types offered by Syndicate Lenders to see which one best fits your business.