Funds are the essential need for any business. Be it a restaurant, retail shop, manufacturing unit, hospital, or any other business; without having funds in hand, no business can continue to survive and grow in the industry. Funds are needed for starting up the business and taking care of growth and expansion at the later stages.
For this, various types of business loan funding options are present in the market. Amongst these, the most favored one is merchant cash advance, also known as MCA. So, let’s have a look at different types of business loan funding choices that businesspeople have.
- SBA Loans: SBA or Small Business Administration loans are the ones that are guaranteed by a federal agency. This agency lets the lenders of such loans extend funds at low rates of interest and flexible terms. They are one of the most commonly opted for business loan funding by the borrowers. SBAs provide the borrower with high amounts of loan.
However, one significant disadvantage associated with Small Business Administration loans is that they are adamant to achieve. This con can be dealt away with by replacing SBA with an MCA. Merchant cash advance is extended to a borrower within a few hours. Moreover, the borrower does not need to fill the tedious requirements like minimum credit history ratings, collateral assets, etc.
- Business Term Loans: Such loans are the primary commercial loans that are used by borrowers to pay for the acquisition of new assets or significant investments done by a business. Such loans involve a fixed rate of interest, and the repayments are scheduled through quarterly or monthly installments. This loan’s repayment also involves a set date of maturity.
Business term loans can be bifurcated into two categories. They are long-term loans and intermediate-term loans. Long-term advances involve a period of as much as 20 years and require collaterals and involve limited amounts that can be extended to the borrower. On the other hand, the average loans involve a period of fewer than three years and need to be repaid through fixed monthly installments.
The best part about opting for a business term loan as a business loan funding is that through it, funds can be taken up involving long repayment schedules or periods. Its negative aspects are that the amount set is fixed as a lump sum amount. Moreover, there isn’t any guarantee of a fixed rate of interest.
- Merchant Cash Advance: Merchant cash advance is the best source of fulfilling the fund’s requirements of business in business loan funding. The funds are quickly received, and they do not involve the use of any collateral, thus helping the small business to borrow funds with ease.
Through merchant cash advance, funds are advanced to the borrower extremely fast, and it is comparatively more comfortable to get the loan application qualified for a merchant cash advance as compared to a traditional bank advance. Thus, merchant cash advance is highly recommended for a businessperson who is in need of fresh funds for his or her business.
- Startup Loans: A start-up loan aims at financing the startups that have almost no credit history. Banks and other financial institutions usually do not approve the loan requirements of small startups until and unless they have a good credit history or collaterals to attach with the loans.
Unlike startup loans, merchant cash advance does not function this way and extends a loan to businesspersons without judging their repayment capabilities through credit history. Startup loans also require a person to guarantee the loan and also require collateral.
- Business Loans for Women: Women are rapidly growing and reaching new heights at par with men in all industries and streams. To provide them with more encouragement and support, various business loans are developed for them. Business loan funding gets quick approval and does not involve too many terms and conditions.
Also, various types of loans are available in such a loan category so that women have a large number of options to choose from as per their needs and requirements. However, the qualifications would vary from one lender to another in this kind of loan. Nevertheless, if a businesswoman goes with merchant cash advance as a small business loan, then the qualifications are same as for a businessman.
- Personal Loans for Business: Personal loans are an excellent source for a business loan funding. They provide a rapid funding facility to the borrower of funds and are usually unsecured. However, one major flaw associated with this type of loan is that they involve a high rate of interests and put the personal credit of the buyer at risk, dissimilar to a merchant cash advance.
- Installment loans: Installment loans are repaid through equal monthly installments that include the principal amount as well as interest. The lender extends the entire amount to the buyer once the contract is signed and then the interest amount is determined by the terms of the loan. Since the installment loan needs to be repaid through fixed monthly installments, it can be a stressful affair at times when the business is not doing well.
To do away with this con, merchant cash advance is an excellent source of business loan funding since its repayment is not made through fixed installments. Instead, a set percentage amount is deducted from the debit or credit card sales achieved in business. Thus, during periods of low sales, a business will automatically repay a lower amount.
- Interim loans: Interim loans are offered by banks and other financial institutions considering the person who will repay the loan and his or her financial capabilities. Such a loan is borrowed by businesspersons who want to make cyclic payments to contractors who are building better facilities at the time when the mortgage on a said building would be used for paying off an interim loan.
Through this article, the various kind of business loan funding is discussed in detail. As said before funds are extremely important for a business and without them, a business can even close down. So to save it from such problems, funds should be arranged on time and from the best possible source.
Before opting for a loan, a buyer should thoroughly make a list of all the possible options and then compare them by their features and facilities provided. While doing this, they will undoubtedly find that merchant cash advance is one of the best business loan funding options available.