If you’re considering a loan for your business, here is a short guide on what options may be available to you. If you own your property, you may want to forgo debt and access the capital tied up in your existing asset.
If you’re considering a loan for your business, it’s absolutely crucial that you do your research and due diligence before embarking on any application. Since the process can be long and detailed, you don’t want to go through the pain of it without knowing the loan itself is aligned with your goals and plans.
You’ll want to start by clearly identifying your specific purpose for the loan. Are you growing and looking to hire more people or open another location? Maybe you need to invest in a new technology to get ahead of the market? Then, make a solid plan that includes the specific dollar amount you’re seeking to make these dreams a reality. You’ll also need to think about the timeline you need to pay back the money you’re borrowing. Once you have this in place, review these different kinds of business loans to discover what might best suit you and your business.
Business lines of credit are super flexible and typically available within a week or so. The nice thing about this type of loan is it’s revolving, so you can access the funds more than once as you pay it down (and you only pay interest on what you spend). Business lines of credit usually range in the ballpark of $1,000 to $500,000. You’re likely looking at an interest rate of about 8-24% and a year or two maturity period.
The Small Business Administration (SBA) is a federal agency that assists small businesses that can’t get help elsewhere in finding needed funds and resources. These types of loans go from $50,000 to as much as $5,000,000 and terms are often 10-25 years. You’ll need to plan for a lengthy process and time frame before accessing funds from this loan.
If you’re under a time crunch, in a high-pressure situation, basically in need of funds yesterday, a short term loan could be your saving grace, provided you don’t need more than about $500,000. Once your application is submitted, you could have a low-interest (think 8% or so) loan as quickly as 24 hours. Keep in mind, as the name says, these are meant for the short term, so they need to be paid off quickly — usually within three years.
For decades, businesses looking to borrow money have used business term loans as a very reliable, quick, popular, and cheap method (fixed interest rates go as low as 6%). These loans are used for anything from expansion to working capital acquisition to equipment purchases, range from about $5,000 to $2,000,000, and can span anywhere from 1-5 years.
The table below outlines some other types of business loans you might want to explore, along with their approximate amounts, interest rates, and terms.
Business credit card
Up to $500,000
8-24% (sometimes with a 0% introductory rate)
Merchant cash advance
Up to $5,000,000
Starting at 7.5%
Interest-free up to 17%
Up to 25 years
Business acquisition loan
As low as 5.5%
Revolving or for 10-25 years
Accounts receivable financing
Potentially up to 80% of your receivables
Starts at about 5%
Up to a year
As low as about 4.25%
If you own your commercial property, another option is to enter into a sale-leaseback with Keyway. In a sale-leaseback, you would sell your property, get cash for your growth needs, and remain as a long-term renter in the same location. Contact us to learn more!