A business, even in its earliest stages, requires a lot of capital. If it didn’t, we would all be businessmen. However, many entrepreneurs find it extremely difficult to get funding, even for a start-up. Official information actually points that economic uncertainty is the biggest challenge businesses must cope with.
If you’re in this unfortunate position, then you’ll find this article helpful, because we’ll tell you about the solution at hand: business loans. Yes, that’s plural – there is more than one type of business loan.
Business Loans You Must be Familiar With
1. Personal loans
Personal loans can be used for start-up purposes. In this case, it’s not the business that has to repay the loan, but you. With other words, it’s a type of loan handed out to the business owner (who has to sign) instead of the business itself.
Personal loans are usually secured on an asset called “personal guarantee”. If you fail to repay the loan, the lender has the right to confiscate the guarantee. This way, he gets the money back anyway.
2. Installment loans
Installment loans are loans designated to be paid over a certain period of time through a certain number of repayments that have been scheduled by the lender and the borrower.
Saying that a loan is an “installment” loan is just a fancy way of saying it’s just a traditional loan. The selling point of installment loans is that they are so much safer than credit cards.
3. Online loans
The Internet is a great source of all types of business loans, start-up ones inclusively. Tens – if not hundreds – of websites like Northcash Loans, for instance, are specialized in offering quick start-up business loans. Still, bear in mind that this type of financing should be taken out in the case of emergencies only, if you know for sure that you are financially capable of making the repayments.
The greatest aspect about online loans is how easy it is to apply for and get one. The terms are a lot more relaxed than those imposed by banks.
4. Line of credit
When you get a line of credit, the lender offers you a certain sum you can access via your credit card at any time you want. The best thing about the line of credit is that you can spend as much as you want.
Say you borrowed $10.000 but did not spend it all. That’s not a problem – you’ll be charged interest only on the sum you’ve used. It’s among the most efficient and safest types of business loans out there.
A microloan can amount to $50k, so it’s not really micro, but anyway. $50k is a quite large sum, so you’ll probably manage your start-up costs with a microloan. The choice, of course, is yours.
Did you have any clue that there are so many types of business loans? Probably not. You should pay attention to the fact that all of these come with different requirements. You need to do some proper research and make sure you’ll get a good deal.
Don’t underestimate a conversation with your accountant, either. Loans are no joke and a start-up borrowing could actually destroy your company in the cradle instead of nurturing it. You can’t be careful enough.