If you want a loan for your business, you can go to a bank, a commercial lender or use your personal credit cards. Before you approach a lender you should know what type of loan you are going to apply for. Here are the various kinds of loans you can choose from.
1. Line-of-credit loans
This is the most useful type of loan for small business owners. You should have this type of arrangement with your banker as it will protect your business from emergency situations. You can get a line of credit for buying inventory and paying operating costs. You can also purchase equipment using this type of loan. It is a long-term loan. It has a low-interest rate and is a low-risk loan. Most of these loans are for one year, but you can renew it after that.
2. Installment loans
You can pay back these loans with equal monthly payments which cover both principal and interest. It can be used to cover any business needs.
3. Secured and unsecured loans
Loans can be secured or unsecured. If the lender sees that the business is sound and that you will be able to repay it on time then you may get an unsecured loan. If it’s a new business then there is very less chance that it will be qualified for an unsecured loan. For a secured loan, you need collateral. Secured loans have low interest rates than unsecured loans.
There are other types of loans available also. You can discuss it with a financial advisor or a bank. A financial advisor can help you decide what kind of loan you should apply for.