Get To Know The Different Business Loan Options
A business, whether it is just a new one or an established one
, needs funds. There are different reasons behind this fact. If it is just a new business, you will need enough money to start it up, buy office equipments, supplies, salary of employees, etc. If it is an established business, then you will need funds for the expansion of your office, shop and establishment or to simply support your business' daily operations.These things show that a great deal of money is involved in putting up and in running businesses. But, not all entrepreneurs have the financial capability to finance the needs of their businesses. So most of them approach lenders and apply for small business loans. But is it easy to take out small business loans from credit organizations these days?
Not really. Many lending firms today impose stringent credit policies and requirements on their applicants. This way, they can properly screen their borrowers and grant small business financing deals only to qualified entrepreneurs.
Still, it is possible for entrepreneurs and business owners to find sufficient funding for business start-up as well as for business expansion needs. In fact they can take advantage of five small business financing options that can provide their stores and shops the funds they need. What are these financing options? Let us find out.
Financing Options for Small Businesses
1. Traditional Bank Loans - Local banking institutions can offer decent credit deals to prospective business owners and entrepreneurs. Such credit accounts normally have excellent features, like long repayment plans, flexible terms, and affordable rates of interest - features that will certainly suit the financial capability of most small businesses today.
However, traditional bank loans are rather difficult to obtain. The reason for this is because most banks are more strict when it comes to requirements. Aside from requiring their applicants to present thorough business plans, they also oblige borrowers to pledge collateral against their small business loans. This way, they can minimize the risk involved in extending credit lines to entrepreneurs and business owners.
So, if you plan to take out a loan from a banking institution, make sure that you determine the qualifications they look for in their credit applicants. This way, you can assess whether or not you are eligible to apply for and be granted the small business loan you need.
2. Government Loans - The federal government is also an excellent source of financing options. You can visit the office or the website of the US Small Business Administration (SBA) to find small business loans that carry low rates of interest and flexible payment terms.
Should you decide to take out loans from this federal agency, it is advised that you prepare a comprehensive business plan as well as finance-related documents. After all these will be the bases used by SBA personnel in evaluating the merits of your application for credit.
3. Home Equity Loans - You can also tap on the equity of your home. You can pledge your home as collateral for a business loan as this can increase your chances of getting approved for the small business financing deal you need. Still you need to heed this warning: Always pay your credit charges on time and in full each month. This way you can minimize the risk of losing your home to repossession..
4. Credit Cards - Personal and business credit cards can also provide you sufficient funds to finance the needs of your business. However, they usually come at a high cost. Most credit cards impose an interest rate of 20% or more. Not only that. Most credit card programs are also laden with fees and other additional charges. So, you need to carefully consider your finances as well as your other credit options before you apply for a business credit card.
5. Your Retirement Funds - Businessmen can also use a percentage of their retirement funds so that they can finance the immediate needs of their commercial enterprises. However, this involves a huge risk, especially because you cannot guarantee that your business will generate sufficient profits. You will need to be extra careful before making a decision whether to use your retirement fund. You may also want to consider other small business financing options.
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