When it comes to doing business in a competitive industry, it can sometimes be challenging to stay afloat, especially when you happen to be at the helm of a startup company. There are often so many beginner’s pitfalls that can be all too easy to fall into stagnation without even knowing. It is the reason why there are plenty of different business loans available for companies in need.
That said, just because a company is in need of a loan does not always mean that they qualify. It is an unfortunate truth, but understanding how business loans work can increase your chances of succeeding. Here are 5 common types of business loans and their application.
Startup business loans
Perhaps the group that is most in need of a loan, startup lenders are often a special case, as there is often plenty of risks that come with lending to a startup company. It is a particularly risky field, but there are also businesses out there that just need a small push to get where they need to be.
Technically, SBA loans are not loans. Instead, it is a government-led program that guarantees up to eighty-five percent of the original loan amount. It is the reason why SBA loans are often also considered startup loans, as lenders are more likely to lend money to risky startups thanks to the help of the government. Interest rates are actually quite low for SBA loans, making it ideal for just about any company.
You will not find many lenders willing to loan at-risk companies due to the high odds of the lender losing money at the end. That said, an asset-based loan is a guarantee that the lender will receive something no matter what, as the company agrees to put up an asset as collateral. Sometimes, it is all that is needed to convince a lender to loan money.
Business equipment loans
While most types of loans are there to help companies with just about any endeavor, the business equipment loan is available to help companies with something more specific. If the equipment you need for your business is too costly to buy in one go, a business equipment loan can be used to lighten the load.
Unsecured business loan
While not quite as common as the other types of loans on the list, the unsecured business loan is special in that you do not have to offer any collateral. The lender will also be the one who will lose out in the event that the company cannot pay. While it might be extremely risky for lenders, it comes as a surprise at how many lenders are willing to go with an unsecured business loan.
Understanding which type of loan will best benefit your company can go a long way to giving your business a fighting chance it needs to succeed. That said, keep in mind that you will need to keep credit scores high to have a chance of qualifying! If you are interested in loans that require no minimum credit score, websites such as Working Capital, LLC provide you with detailed lender reviews.