Are you trying to find the best loan for your business? Follow our guide to different business financing options to help you make your decision.
So you’ve found an exciting new idea for your next business venture? Congratulations, finding a business idea isn’t easy! That means you’ve identified a problem in your niche or industry that you’re uniquely qualified to solve.
Entrepreneurs and small business owners are vital towards driving the economy forward. You develop new products and solve problems that more traditional businesses and business-owners might not even be able to see.
Now you’ve just got to find your financing. Finding the right business financing options is important, considering that 82% of small businesses fail due to cash flow problems. You might need to dig a little bit for the right lending option, as well, as big banks and institutional lenders only approve 23% of funding requests.
We’ve hunted down seven of the best loan services for small-business owners and entrepreneurs to help you with your search.
The 7 Best Business Financing Options
Let’s begin with a disclaimer. There’s no such thing as a boilerplate financial plan that will fit every business or brand. Every business is unique, as is every industry.
That being said, let’s take a look at some of the most common financing options to let you know your options. Knowledge is power, after all!
The Small Business Association is designed to help promote and encourage start-ups and new business owners get off of the ground. If you’re not planning on launching an enormous multinational corporation straightaway, SBA loans are a good place to start!
Here are the four most common types of SBA loans for your consideration.
7(a) Loan Program
The 7(a) is by far the most popular and versatile option for financing a business from the SBA. A 7(a) loan can be used for a wide variety of business-related expenses. These include purchasing real estate, functioning as working capital, or even refinancing existing debt.
For brand-new businesses just getting off of the ground, a microloan can be a great choice. Microloans cover many of the same expenses as 7(a) loans, but for smaller amounts of capital and with shorter repayment terms.
The maximum amount of a microloan is $13,000, which must be repaid by a maximum of six years.
CDC/504 Loan Program
The economy is always in a state of flux. This can throw a major spanner in the works for new business owners when trying to construct a business plan as it can be difficult to gauge what your actual expenses will be.
The CDC/504 Loan Program offers small-business loans at a fixed rate. This can be used to cover assets which tend to fluctuate greatly in price like real estate or equipment rental.
CDC/504 loans tend to cover 40% of the expenses. Approved lenders can cover up to 50%. It’s up to the borrower to make up the difference.
CDC/504 loans can be for up to $5.5 million. Repayment is offered for 10- and 20-year payment plans.
If you’re looking for a budgeting tool to help you create as thorough and detailed of a business plan as possible, try out this tool to calculate the size of business loan you might need.
Small businesses are particularly vulnerable to unpredictability. It can be difficult to get insurance coverage for unexpected catastrophes like natural disasters.
SBA disaster loans are designed for this eventuality. Disaster loans can cover up to $2 million, which can be used to repair or replace damaged assets if you’ve been involved in a declared disaster.
SBA loans are fantastic if you qualify. The criteria can be rather strict and regimented, however.
If you’re looking for flexibility or if you don’t meet the SBA requirements, there’s a number of traditional loan options which might be a great fit.
Sometimes you just need a little bit of equipment to get your business off of the ground. Equipment loans let you just do that. They let you get all of your equipment, all at once, and make monthly payments.
Line Of Credit
If you don’t know how much money you’ll be needing on a monthly basis, you may need a line of credit. It’s there for when you need it, and you can leave it alone when you’re in the black.
Working Capital Loan
There’s a lot of flux, being a small-business owner. Some months, you’ll have more work than you can keep up with. Others, you won’t have enough to pay your employees or pay your utilities, let alone cover your personal expenses.
A working capital loan is there for these moments of unpredictability. They’re based off your average monthly earnings, which helps prevent you from getting in over your head. Then you can repay the loan amount over the span of a month, following specific terms.
These are the most common financing options for small-business owners, startups, and entrepreneurs. Spend some time looking into each available option and find out which will be best for your best model in your specific industry.
We need new businesses and entrepreneurs to help keep driving the economy forward. Things are stabilizing in the world market. It’s a great time to get into business for yourself and launch your dream career!
Looking For More Small-Business Advice?
That’s great to hear! We are here for you, to bring you the latest news and cutting-edge advice on everything from finding the best business financing options to offering forms and templates for your business.
Join our Small Business Forum, as well, to share ideas and inspiration with fellow business owners and entrepreneurs!