WHAT IS BUSINESS LOAN?
A business loan is broadly used by businesses attempting to borrow or acquire capital. However, it’s important to understand that all loans involve a borrower and a lender, also known as a creditor and debtor.
Here are the top 10 business funding options available to every business. Navigating these options alone can be daunting because not every lender offers the same loans. Some lenders provide loans that others won’t, and credit requirements vary. For example, one lender might offer loans to those with lower credit scores, while another only works with borrowers who have excellent credit.
As a borrower, how do you determine a lender’s credit requirements? If you approach the wrong lender who doesn’t offer the program you need, you might have to start over, leading to “bank hopping.” This is a time-consuming process where business owners apply to multiple places in search of the right loan.
A business loan broker, like Liberty Capital, can guide you to the right loan for both short-term and long-term funding solutions. Let us help you find the ideal funding option efficiently, saving you time and effort. Liberty Capital Group, Inc. offers a range of financing solutions tailored to meet the diverse needs of business owners. Here’s a detailed overview of the top 10 loans and financing options available:
1. Equipment Finance Agreement
– Purpose: To finance outright any business-related equipment.
– Features: Typically secured by the equipment itself, with fixed interest rates and repayment terms that match the useful life of the equipment.
– Benefits of equipment finance agreement: Enables businesses to acquire essential machinery and tools without large upfront costs. Unlike Fair Market Value or Dollar Buyout Leases, Equipment Finance Agreement (EFA) doesn’t have any end of term buy out option. You automatically have ownership of the asset upon completion of the agreed term.
2. Line of Credit
– Purpose: Provides access to a line of credit that businesses can draw from as needed for various purposes.
– Features: Revolving credit, like a credit card, with flexible repayment terms. Interest is paid only on the amount used and time borrowed.
– Benefits: Ideal for managing cash flow, covering short-term expenses, or handling emergencies. Peace of mind is priceless for small business owners.
3. Term Loan
– Purpose: To borrow a term loan to finance specific large projects or investments.
– Features: Lump sum disbursement with fixed or variable interest rates and a predetermined repayment schedule. Predictable payments and terms.
– Benefits: Offers predictability with fixed payments and is often used for expansions, renovations, or substantial purchases. Use on a per project or venture basis without giving out equity or profit.
4. Merchant Cash Advance (Future Receivable Sale)
– Purpose: Merchant Cash Advance provides a lump sum payment in exchange for a portion of future revenue or credit card sales. Terms can be daily, weekly and short-term. However, you have quick access fast and renews when it’s paid down.
– Features: Repayment is made through a percentage of daily credit card transactions, with no fixed term. Or, fixed daily or weekly with a fixed term. Terms typically are short and approval is based on you’re the last 3 to 4 months of revenue.
– Benefits: Fast access to capital and repayment is flexible based on sales volume. Credit not a factor. Industry is not a factor for some lenders. Most can qualify with very little documentations.
5. Commercial Loan
– Purpose: General-purpose loan for business expenses, often used for real estate, equipment, or expansion.
– Features: Can be secured or unsecured, with varying terms and interest rates depending on the lender and business creditworthiness. Long-term low-rate loans.
– Benefits: Larger loan amounts with potentially lower interest rates for qualified businesses. Have tight Loan-to-value is in place unlike the other loans that don’t consider collateral.
6. Business Credit Card
– Purpose: To manage everyday business expenses and improve cash flow management.
– Features: Revolving credit with a credit limit, rewards programs, and potential for building business credit and personal credit.
– Benefits: Convenience, rewards, and short-term financing without needing to secure collateral.
7. Invoice Factoring
– Purpose: Converts outstanding invoices into immediate cash.
– Features: The factoring company purchases invoices at a discount, providing immediate funds and assuming responsibility for collections.
– Benefits: Quick access to cash based on accounts receivable, improving liquidity.
8. Contract Financing
– Purpose: Provides funds based on the value of contracts or purchase orders.
– Features: Financing against the value of existing contracts or future sales, with repayment often tied to the completion of the contract.
– Benefits: Enables businesses to undertake large contracts without depleting cash reserves. No payment. Progress payment.
9. Equipment Leasing
– Purpose: To acquire the use of equipment without purchasing it outright and with intention to return upon depreciation. Have been exhausted. You have no plan to keep it and you fully finance it using Fair Market Value (FMV). Capital lease or operating lease can be your choice.
– Features: Agreements to lease equipment for a specified period with fixed payments, with options to purchase at the end of the lease. You do no maintenance or repair during the life of the lease.
– Benefits: Lower upfront costs, potential tax benefits, and the ability to upgrade equipment periodically. Avoid obsolescence. Hedge against inflation.
10. SBA Loans
– Purpose: Small Business Administration-backed loans for various business needs, including working capital, equipment, and real estate.
– Features: Longer repayment terms and lower interest rates due to government guarantees. Includes popular programs like 7(a) loans and 504 loans.
– Benefits: Harder qualification criteria and favorable terms compared to traditional loans. Must have skin in the game. Need good credit, down payment or additional collateral.
As a business owners would not you need to work with 10 different lenders but only one broker can make it happen to keep your business funding liquid.
Each of these financing options caters to different business needs and situations, providing flexibility and support for various aspects of business operations and growth. Business owners should assess their specific requirements, cash flow, and long-term goals to choose the most appropriate type of financing.
Liberty Capital Group, Inc. can do this under one roof. Over 20 years servicing small business with all types of funding. APPLY TODAY!