Small Business Loans: How To Best Use Them
There are many sources for small businesses to get the funds needed for growth and stability. Small business loans are just one of the ways a business owner can avoid using personal funds for costs such as advertising, inventory, building maintenance and employees. Here is a look at various small business funding solutions and how to use them.
Personal Credit Cards
The protections for personal credit solutions are robust and versatile, more so than business credit cards. Personal credit solutions also tend to have lower interest rates and fees which can save your business a lot of money over the long run. How do you reflect that these were business purchases? Use expense reports.
SBA Loans
The Small Business Administration offer loans specifically so small businesses have a chance to grow and thrive. These are a great benefit whether your small business is a startup or you’ve been in business for a while. These are typically low cost and don’t require extensive credit records. However, they are still paperwork intensive and can take a while to close on. If you need money but that need isn’t immediate, such as planning for an expansion or other investment many months down the road, an SBA loan is a good choice.
Bank Loans
Small business loans from your local bank can provide funds that are simple to get and backed up by years of reliability. Unfortunately, there are steep qualifications at most banks because their loan programs are meant to make them money. However, if you have the right qualifications, you can usually get the best deal because banks will compete to offer loan services to businesses.
Alternative Loans
Alternative lenders offer unique capital solutions such as merchant cash advances and stated-income loans. Like SBA loans, these solutions are often easier to get than regular bank loans. The downside is the likelihood of high rates and fees. This is expected since lower qualifying factors means higher risk to the provider. Use these loans when you know the investment will pay for itself quickly and you won’t take huge interest losses.
Small business loans come in a variety of forms and have different benefits and drawbacks. The solution you choose for your business will largely depend on what you can qualify for, how much money you need and how fast you need it. Comparing your needs with what you can get helps narrow down your search. This lets you use your newfound capital for whatever what your business needs most.
