There are a number of different business loans on offer, but do you know which one will work best for you?
Financing can help your business at various stages, whether you’re looking to get off the ground, to expand, or to meet a temporary cash shortfall. There’s a number of loan options available to help meet your business needs.
Before you start looking for a business loan, it’s important to understand the multiple offerings you may have available to you. You may not qualify for all of these, as eligibility criteria can vary from one loan type to the next. This guide takes you through the most commonly available options so you can pick one as per your needs.
Lending Club Business Loan
Lending Club offer you the chance to borrow up to $300,000 as alternative to bank personal loans. Total Annualized Rates from 8% - 32%*.
- Min. Loan Amount: $5,000
- Max. Loan Amount: $300,000
- Loan Term: Up to 5 years
- Total Annualized Rate: 8% - 32%
- Origination Fee: 0.99% - 6.99%
- Borrow for working capital, equipment finance, marketing, or other business purposes.
- Confidential and secure online application!
- If the provider quotes a different rate to the one above please let us know
How does a business loan work?
How a business loan works essentially depends on the kind of loan you get. With invoice financing, you can sell your invoices to a lender. The lender pays you a significant portion of the invoice amount, but holds a remaining percent until the invoice is paid.
If you opt for a line of credit you get access to credit up to a predetermined limit. You only pay interest on the amount you draw. If you don’t qualify for a business loan you may want to opt for a personal loan to fund your business.
Some of your other options include SBA loans that are government-guaranteed, traditional-term business loans, short-term business loans, equipment financing, merchant cash advances, and startup loans.
Features of a business loan
Several aspects require your attention when you’re running a business loans comparison.
- Loan amount. Use the amount you wish to borrow to find suitable options. You can apply for between $2,000 to $35,000 with personal loans, while short-term business loans or merchant cash advances can give you access to between $2,500 to $250,000. SBA loans come with minimum and maximum limits of $5,000 and $5 million, respectively.
- Loan term. Short-term business loans tend to offer terms of three to 18 months. If you get a merchant cash advance, the loan amount are automatically deducted from your merchant account every day. You can get up to five years to repay a traditional term business loan. With SBA loans, the term can extend up to 25 years.
- Interest rate. SBA loans tend to offer the most competitive interest rates. This aspect requires your attention because even a small difference in interest rate percentage can have an effect on the total interest payable.
- Business age. To qualify for a business loan, your business will typically have to meet a minimum age requirement. To apply for a short-term loan or a merchant cash advance, your business should be operational for at least six months. To apply for a business line of credit or equipment loan, this increases to one year. To qualify for a traditional-term loan or an SBA loan, your business should be at least two years old.
- Revenue required. Lenders look at the revenue your business generates annually to make sure you qualify. Annual revenue of over $75,000 will typically qualify you for a short-term loan or an SBA loan. If you’re considering a merchant cash advance or equipment financing you will require minimum annual revenue of $100,000. This increases to $150,000 for a line of credit or a traditional-term loan.
Have you weighed up the benefits of business loans?
- Multiple options. Capital funding for businesses can be easy to find, provided you know which kind of loan suits you best. Once you know what kind of funding you want, you get considerable variety when selecting the right lender.
- Various loan amounts available. As long you as you can demonstrate an ability to repay and meet other eligibility criteria, you can borrow any amount from $2,500 to $5 million.
- Use funds for different purposes. With most other kinds of business loans, you can use the money for practically any business related purpose.
- Interest rate and fees. The interest rate you get depends on multiple factors. It can vary from 6% to 35%. You may have to pay additional fees and charges as well.
Things to consider when choosing a business loan
If you think that you may have difficulty repaying your loan it is best that you avoid taking the loan in the first place. For instance, have you looked carefully at the cash flow projections for your business for the loan term? Are you borrowing more than you need to? These are things you need to take into account.
You should ideally avoid taking a business loan with a very high APR, as this increases the cost of the loan significantly. Make sure you go through the loan contract carefully, as this gives you a clear indication of the interest as well as other applicable fees and charges.
Have more questions?
How quickly can I get a business loan?
This depends on the kind of loan you want. The turnaround time for a personal loan for businesses can be as little as four days. With a merchant cash advance or invoice financing, you can get your hands on the approved funds within one day. In some cases, the process can take two weeks to a month or more.
What is an SBA loan?
The US Small Business Administration (SBA) offers different loan programs in the form of SBA loans. You can use proceeds from an SBA loan for a variety of purposes such as purchasing equipment or inventory, adding working capital, buying real estate, acquiring other businesses, or even refinancing existing debts.
What lending criteria do I have to meet to get a business loan?
Lending criteria can vary from one lender to another. However, it’s normal for a lender to look for a regular flow of income in terms of sales over a prolonged period of time.