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Business Loan Acquisition: Understanding the Options Available

by Shield Funding Business Loans for Bad Credit

Small and medium-sized businesses (SMBs) often put their faith in their local neighborhood bank anytime they need to obtain a small business loan. However, there are myriad kinds of business loans available that offer different rates and require different qualifications. Unfortunately, most financial lending institutions specialize in providing just two or three loan options, and do not have the capacity for educating their customers on every available business loan product on the market for business owners.

For small and medium-size businesses, there are loan options available for almost every type of business or circumstance. Finding the best financial institution that provides the optimal business loan for your situation can significantly enhance the chance for approval when submitting an application.

Many financial institutions offer lending solutions for both short and long-term business expenses. A short-term loan is often considered one that will reach its maturity in 12 months or less. Long-term solutions for businesses typically reach maturity anywhere from one to seven years or longer.

Lending institutions offer both secured and unsecured solutions. A secured loan will use personal or company assets as the necessary collateral that is put up against the loan. However, some small and medium-size business owners have established credit worthiness where a loan can be obtained without any secured assets as collateral at all.

Types of Loans

Banks, lending institutions, and government-backed loans are available for nearly any type of small and medium-size business. The SBA (Small Business Administration) offers small business loans with funding that can reach outwards of 20 years for payback with very low rates. Banks also offer very competitive rates just slightly above the prime lending rate with options that mature over a period of years.

Additional business loans that are available for small and medium-size business include:

             Accounts Receivable Funding/Factoring – Collateral/Documentation is usually expected, and interest rates can range around 10% to 15% or higher.

             Merchant Cash Advance – When merchants need funding to purchase merchandise and have not received enough in accounts receivable, they often turn to a merchant cash advance. Accepting credit cards is required. Typically, these higher interest alternative loan solutions can range from 18% to 22% or more with funding that typically lasts less than 1 year.

             Finance Start-up Loans – This specialized type of financing is usually reserved for individuals that are becoming involved with nationally recognized franchises. The interest rates often range between 10% and 30% or a percentage of the business ownership.

             Business Acquisitions – When one business acquires another business they often turn to financial institutions for lending. Usually the interest rates range between 4% and 7.5% with funding that lasts upwards of nine months or longer.

             Lines of Credit – Many businesses require a commercial line of credit. Typically this pre-arranged amount is based on the company inventory/sales. In addition, it can also be obtained through PO’s (Purchase Orders), or A/R (Accounts Receivable). Interest rates can range between 5% in 25% with funding that lasts upwards of two months.

             Professional Loan – Professionals including lawyers, dentists, doctors and other medical care providers often need short-term loans. Many lending institutions offer funding options the last upwards of six months with interest rates ranging from 5% to 10%.

             Construction Financing – Commercial construction companies often need commercial financing with payback periods lasting up to 25 years and interest rates ranging as high as 7% to 8%.

Many businesses find the need for funding and depending on the type of business and its financials, there are various funding options, the above mentioned are just some examples. By finding the right lender, not only is getting an approval usually easier, the rates and terms can work for that particular business model and lead to a successful outcome.


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