Once you have an idea of how much you can borrow and the size of loan payments you can afford, it’s time to shop for a business loan that meets your needs. As mentioned earlier, there are several types of business loans available that may offer various loan terms and repayment schedules. Generally, you could start with three broad categories of business loans before narrowing down your choice.
Online business loans from alternative lenders typically have lenient borrower requirements and fast time to funding, sometimes as quick as one business day. The downside to online loans is that they are often expensive with higher rates than what you’d find with traditional bank loans. Loan amounts may be smaller for online loans, which typically max out at $500,000. But if you need fast access to funding to cover a small or medium-sized business expense, an online loan may be a suitable option if you can afford the cost, especially if your credit profile is less than perfect.
SBA loans are issued through banks and other financial institutions and are backed by the U.S. Small Business Administration (SBA). The SBA guaranty reduces risk for lenders, which makes it easier for those lenders to approve borrowers who may not otherwise qualify for financing. Individual lenders may charge their own interest rates, but the SBA caps rates to keep loan costs low, making SBA loans a desirable financing option.
You may want to take the traditional route and pursue bank financing if your business is well established. You may qualify for favorable rates and terms if you have a good relationship with the bank and have been a long-time customer. Also, you may be able to secure a larger loan amount from a bank than an online lender. But remember that it may take a few weeks or months for a bank to approve your loan application.
Be sure to shop around to compare loan offers from various types of lenders. Look for a lender that offers the amount you need with rates you can afford and a repayment schedule your business can manage.
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