What are Your Business Loan Options?

There’s no denying that at one point or another, you will be needing SME funding to increase inventory, invest in infrastructure, or just keep the daily operations running.

In terms of SME funding, businesses have two basic options—bring in investors or apply for a business loan.

While each of the two options have their upsides, the latter tends to be favored more as it translates to lesser outside input when running the venture.

Options

For business owners looking to secure additional capital, it is fortunate to note that there are numerous business loan options available for them to pick from.

Some of the most popular business loan options include:

Long-Term Loans

This type is considered one of the most common extended by many creditors.

Money from long-term loans are often used for refinancing, acquisitions, and business expansions.

In some cases, they are also used as working capital.

While often involving large amounts of money, it is fortunate to note that long-term loans often come with lower interest rates compared to other business loan alternatives.

If you are currently running a robust and thriving business, then getting the approval would be a lot easier.

For new businesses that have strong growth plans, the likelihood of being granted a long-term loan is also relatively higher.

Lines of Credit

Rather than receiving a lump sum, a line of credit can give business owners access to funds incrementally or as the needs arises.

This is in a way similar to using a credit card.

While the compounded interest and fees for lines of credit can be higher compared to the other options, this business loan alternative is considered beneficial by many.

Basically, lines of credit are best for income shortfalls and not for improvements or expansions.

Alternative Financing

Business owners in the lookout for non-bank lending products would be glad to know there are plenty of options available.

These options can come in the form of peer-to-peer loans, cash advances, leasebacks, and asset-based loans.

Money from alternative financing are often used for purposes like funding small scale expansions, meeting cash shortages, and getting the venture off the ground.

While usually involving only a small amount compared to what banks provide, these credit types often come with interest rates that are higher.

Short-Term Loans

Unlike other business loan alternatives where payments are made on a monthly basis, short-term loans are often payable and due at the end of the term agreed by both parties.

As the name implies, short-term loans are typically used for short-term needs like raising cash for payables, completion of small projects, and purchase of additional inventory, etc.

Short-term loans are usually extended by credit unions and banks and are considered ideal for retailers and seasonal businesses.

Approval

Once you have figured out the kind of business loan that will best fit your needs, your next challenge would be to find ways that will help fully maximize your chances of getting the nod.

The following pointers should get you off to an amazing start:

• Understand and know the consequences of your credit score. If there are issues, you need to find ways to address them as soon as possible.
• Determine possible sources of current income and ensure you are able to clearly outline how the money you will be borrow will be used.
• Provide lenders with interim financial statements that will highlight a cash flow that is positive. For starters, a positive cash flow will help ensure potential creditors of your ability to settle your obligations fully and on time.

Know more business loan options by heading to www.capitalize.com.sg today!