Short term loans provide business owners with extra capital, typically with terms of 18 months or less. Having extra cash on-hand better equips business owners to handle day-to-day expenses or take care of an emergency. Interest rates tend to be much higher on short term loans than on other types of business loans, and payments can be required daily. The advantage, though, is that businesses can use the money for anything and the debt is paid off quickly.
A term loan is a basic business loan-it has a set amount borrowed, a set repayment schedule and a fixed or variable interest rate. Long term loans can be provided by traditional banks and non-bank lenders, such as online lenders.
If you need equipment for your business, you can take out a loan to finance it instead of purchasing it yourself. You can finance computers, manufacturing machinery, vehicles, and more
Businesses with accounts receivables can use those assets as collateral to secure a loan. It allows companies to access capital that has not yet been paid by their customers. The lender will pay up to 85 percent of the business’s invoices upfront and pay the remaining 15 percent once the customers pay their invoices.
An SBA loan is a loan that is backed by the Small Business Administration but administered through participating banks and lenders. The maximum amount a business can borrow is $5 million and there is no minimum.
Working capital loans were put in place to help businesses fund their everyday expenses, such as advertising or wages. These loans are not intended to use for purchasing assets or for investing, but rather to help cover your day-to-day expenses.
A business line of credit is similar to a credit card in that the bank or lender provides the business money on a revolving basis. The business can spend the money as it pleases and is not charged interest until the line of credit is used. Payments are also not due until a purchase is made.