Banks, credit unions, non-bank lenders, and governments offer small business loans. Many businesses apply for government financing because of the longer payback period.
Long-term and Short-Term Loans
Businesses apply for different types of government funding, including equipment and micro-loans. In addition to loans under government programs, credit unions and big and small banks offer different financial solutions. Applicants can choose from unsecured and secured loans, and the latter feature lower interest rates. Secured loans require some form of collateral such as real estate holdings, machinery and equipment, interest earning deposits, inventory, fixtures, and others. A good credit score is the main requirement for an unsecured loan. Banks also offer term, commercial fishing, and conventional loans. Traditional lenders such as brick-and-mortar banks usually offer debt financing. Banks also provide real estate loans to construct or purchase industrial, retail, and apartment buildings. Financial institutions also offer permanent and owner-occupied financing. Banks provide micro-loans to young businesses and start-ups. You can use the funds to purchase supplies and materials or as working capital. The interest rate usually varies between 8 and 13 percent. Short-term loans are another option if you need cash for purchases, inventory, or accounts payable. In addition, there are small business loans under different government programs that come with attractive interest rates.
Banks require documents such as licenses and business certificates, loan application forms, and others. Business owners must submit documents such as financial statements, bank statements, business plans, resumes, and income tax returns. It is a good idea to provide a brief history of your company. Bring your cash flow statements, corporate resolution, and proof of non-business income. Banks are also interested in your business profile – length of time in business, history, number of employees, sales volume, etc. In addition, you must submit a loan request that describes the type of loan, amount, purpose, preferred payment options, and so on. Some banks also require that applicants submit copies of contracts and business registrations. Make sure you write a solid business plan to increase your chances of getting approved.
Business owners are also offered credit cards, lines of credit, equipment financing, equipment sale-lease backs, and other financing solutions. Borrowers can apply for multi-family real estate loans, equipment financing, and more. Business acquisition loans help companies to purchase existing businesses.