Image Source: Pexels
To get a small business off the ground, you need money, and lots of it. This can come from various places, from private investors to crowdfunding campaigns, and the options have become increasingly diverse in recent years.
Even so, loans remain one of the most common and effective ways to secure the capital your company needs to succeed.
Here’s a look at the various types of loan that will prove useful at distinct points along your journey to entrepreneurial success.
Short term loans
When you need a speedy injection of cash with minimal delay, a short term loan will serve your business well.
This can be useful to overcome cash flow issues that are time-sensitive, to prevent disruption to your operations that might otherwise occur.
Be aware that such loans are usually accompanied by short repayment periods and steep rates of interest.
Small businesses are well served by loans from government agencies and public organizations at multiple levels.
Exploring funding programs is useful, as this not only covers loans and investment link-ups, but also things like disaster assistance packages which can be claimed if you experience some kind of serious dilemma that’s outside of your control.
Car loans or other personal loans
When you run a small business, procuring vehicles to facilitate different aspects of your operations may be necessary right away, or as you aim to expand your operations.
In this case, having a car loan pre-approval in the bag is useful, because it means you can confidently apply for a tailored package that will let you snap up a new or used vehicle that will serve you well, and impress customers also.
Using personal loans for business expenses isn’t always wise, so only do so if you’re confident that the repayments are affordable. Talk to your accountant if you want to learn about the tax implications.
Debt consolidation loans
As your business accumulates debt through loans, credit cards and so forth, it’s possible to reach a point at which you not only have too many different outgoings to wrangle, but are also faced with sky high repayment costs due to unfavorable rates.
This is where debt consolidation loans come into play. You may have encountered them as a solution for consumers, but they also have a part to play in bringing financial stability back to commercial organizations as well.
The concept is simple; you take out a single loan to pay off other outstanding obligations, effectively consolidating them into one agreement. You then repay this over time, enjoying a better deal in terms of the interest you’re charged on your loan.
Loans in this category can leave you tied in for several years, and aren’t immune to rate fluctuations. But in the right circumstances, they can be a boon for your business.
Borrowing from traditional financial institutions is no longer the only way to get money flowing into your business. You can also explore the possibilities afforded to you by peer-to-peer lending schemes.
These basically allow you to borrow cash from people who are looking for an alternative to traditional investment opportunities, with lending platforms acting as the intermediaries.
The setup is similar to applying for a loan elsewhere, but approval rates are higher. So long as repayments are maintained, you’ll have a lot to gain from such a setup.
The loans available to small businesses go beyond what we’ve covered here, and you should compare as many options as possible before you decide. That said, even mainstream lending services have competitive packages for companies that are ambitious and financially responsible.