Different types business loans

Different types of business loans: which one to get

It doesn’t matter the stage or size of your company; financing is always a good option to help you achieve new goals and there are a lot of options out there to help you in your way to growth. But with all these different types of business loans options, how can you choose the right one?

It’s a matter of knowing your business, its needs and creating a strategy that can help you fulfill them. With that in mind, the next step for making the right choice is to get to know the structure and advantages of each financial product to see which one is the right one for your needs.

You can choose from a term loan to a merchant cash advance like the ones you can find in Camino Financial, and really make the best of the proper business loan. Remember that you can have a healthy growing business and still need a cash boost, financial aid is not synonymous with problems as long as you have a structured plan to pay it back and use it to grow.

From A to merchant cash advance

There are numerous types of business loans that can help you in different situations. These are the most popular ones:

  1. Term loans

This is the most common one, since it’s cash wired to the business account to use it for whatever need it has at the moment. It can go for 1 to 5 years and the interest rate may vary from 7 to 30% depending on the financial institution and the company that apply for it. Use it if you need the cash flow for a down payment or a big purchase that requests an immediate solution.

2. Business lines of credit

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In this case, the company will have an open line of credit that can be used at any moment. It’s a lot like a credit card, it’s not part of your business cash flow but you can use it at any moment, as long as you don’t exceed your limit. You can pay it back in 2 years and the interest rate is a lot like a term loan but you only pay it for the money you use and not for a total sum of credit. Ideal if you want to have a break in case of emergency line of credit.

3. Equipment financing

Imagine that you need to update your business computers, the big machine that manufactures your product or even to buy some new desks. This is the option for you and you can pay it back for 5 to 6 years, just make sure that the purchase outlasts the paying plan. No one wants to keep paying for something that’s already gone. Take into account that the interest rate can be up to 40%. Choose wisely.

4. Invoice financing

If you offer financing to your clients but you need the cash right away, you can access one of these business loans. Your receivables will be the foundation for the amount of money you can get and you pay it back once the client pays you, with a couple of fees that can go up to 4% of the total of each invoice. This will help you with your cash flow if you need it before your clients are ready to pay you back.

5. Merchant cash advance

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This option is meant for fast cash, but it also means a daily charge on your account to get the money back. Say you ask for 1,000 dollars for 1 year. You will be paying back 2.7 dollars each day for that term, plus a fee that can go up to 350% of the original loan. You’ll have to choose the right financial institution to access a merchant cash advance that has good conditions and is helpful for your business.

With these five options, you can have a good idea of which type of business loan you need and how to best apply it. Remember that these options are not meant to be used for a joy ride or as petty cash. Make the most of your business loan with the right one for your needs. Do you know which one you should get now?