If you’re looking to finance your business, you have several options. These include online lenders, credit unions and peer-to-peer lending sites. These types of loans are typically less risky than traditional bank financing and can offer competitive rates. They also have a faster application process.
Working capital loans are used to cover daily operating expenses like rent, payroll and debt payments. They have lower maximum funding amounts and shorter terms, but you can usually get one with a personal credit score of at least 660.
Getting a loan
There are many different types of small business loans available to help you start, grow or keep your business up and running. These can include business lines of credit, cash advances and alternative small business loans. These loans may require collateral or a personal guarantee from owners. They also may have more strict terms and higher interest rates than conventional loans.
You can apply for a small business loan online from lenders that offer their own loan products, as well as from lending marketplaces that match you with multiple lender offers. However, you should be aware that these lenders may charge you a fee for their services. You should research the market and compare offers to ensure you are getting the best deal. In addition, you should consider the speed of approval and repayment terms.
Requirements
Whether you’re trying to build your business credit or simply need extra cash, there are many different financing options. However, some lenders have specific requirements that you must meet to qualify for a loan. These requirements can include personal credit, annual revenue, years in business, and collateral.
Typically, large commercial banks have the most stringent requirements for small business loans. Fortunately, online tools can match you with lenders that are more lenient.
The most important factor for a small business loan is the borrower’s personal credit score and cash flow. A high personal credit score can help you get a loan faster, while having great cash flow and income can lower the risk for the lender. Lenders also look for a balance sheet that shows assets, liabilities, and owner equity.
Interest rates
Many business lenders offer a variety of loan types to meet the needs of small businesses. Some of these include term loans, business lines of credit and merchant cash advances. Some of these lenders require physical collateral — such as real estate or equipment — while others may place a blanket lien on business assets and may also require a personal guarantee.
Other lenders don’t require collateral and instead rely on factors to assess risk. The way they report interest rates varies, too. Some use annual percentage rates (APRs) to show the cost of borrowing, while other lenders may choose to use simple interest or factor rates. When comparing rates, look at the total interest costs versus the loan amount to make the best choice.
Fees
Before you apply for a business loan, make sure to understand the fees associated with it. These can include an origination fee and a financing charge. These charges can eat into the loan principal, so it’s important to ask about them before agreeing to any contract.
Most lenders will consider personal and business credit scores when reviewing a loan application. Some will also look at the applicant’s revenue, profitability and cash flow. In some cases, a higher risk business will have to pay a higher interest rate than a low-risk one.
The top online small business loan providers offer a wide range of loan options for different needs. Bluevine, for example, offers fast funding with same-day approval. Other popular lenders like Credibly and Fundbox provide flexible working capital loans, with minimal requirements.
Payments
Small business loans are available from banks, credit unions and online lenders. Their terms, rates and qualifications vary by lender. Bank loans typically have the highest maximum loan amounts and longest repayment terms. They also require a high personal credit score and several years of operating history. They may also require collateral.
Other types of small-business financing include equipment financing, which offers loan terms that match the expected life of the equipment, and business lines of credit, which are revolving forms of funding. Both options require regular payments and can help you manage cash flow.
Some small-business lenders offer dashboards and mobile apps to help you manage your funds, including disbursements and repayment. These tools can make it easier to track your expenses and build a strong business credit rating.