Only 56% of businesses make it to their fifth year. For 29% of businesses, running out of cash is the reason they’re forced to close their doors. Without funding in place, your business could end up struggling, too.
Thankfully, there are many different types of small business loans available that can help.
Unsure of where to start? Here are the different types of loans for your business to consider. By learning how to get money for your business, you can keep the doors open and find new ways to grow.
Set yourself up for success with these five types of business loans.
Business Line of Credit
A business line of credit is similar to having a credit card. However, this type of business loan is ideal for businesses that already have low credit ratings.
If you apply for a business line of credit, you’ll gain approval for a maximum amount of credit you can draw. Once you repay that amount, you can acquire more. You’ll only pay interest on the money you borrow.
A business line of credit offers:
- Flexible funding (ideal for emergencies)
- Fast approval times
- Low APR rates
- High Maximum borrowing amounts
However, there are high penalties if you miss payments. You might also need to provide collateral, such as inventory.
The Small Business Administration (SBA) can partially back a loan between $5,000 and $5 million. However, the loans are actually provided by commercial banks and online vendors.
Many different types of small business loans can help keep you afloat. With an SBA loan, however, you won’t have to worry about high-interest rates. You’ll also have longer monthly repayment terms.
Merchant Cash Advance
Big banks approve almost 30% of small business loans. As you consider these different business loan types, consider visiting your bank.
If you need a lump sum quickly, these business loan types can help. Merchant cash advances will give you a sump in exchange for a percentage of your daily credit card transactions.
This loan type is ideal for businesses with low credit scores. However, interest rates are usually high.
Bridge loans are short-term loans you can use before securing permanent financing to replace it. With a bridge loan, you can meet your obligations by gaining access to immediate cash flow.
There are short-term loans that last up to a year. However, these loans often include high-interest rates. You’ll need to back up this type of loan with collateral, such as inventory or real estate.
Companies can use different types of business loans, including bridge loans, while waiting for long-term financing. You can use a bridge loan to cover payroll, utilities, inventory, rent, and other expenses while you wait for funding.
Bridge loans are often a better alternative to acquiring an equity partner. You can also use a bridge loan as a down payment on a build-out project.
Build Your Business: Types of Small Business Loans That Can Help
Ready to build your business? You might want to explore these types of small business loans first. Then, you have the help you need to kee your business afloat!
Discover more small business tips in the Finance section of the blog.