Everything You Need to Know About Business Loans
One of the first things entrepreneurs need to tackle if they’re going to be prepared when they launch a business? Financing. If you don’t know how to make the money work to get your company off the ground, you won’t go very far. Financing remains important as you grow, too. If you don’t keep the right credit resources on hand, you won’t have an easy time managing cash flow when you have a high demand for new orders and a lot of outstanding invoices. Here’s what you need to know about loan options, the difference between business loans and other kinds of business financing and learning how to tell what product fits the situation.
First, you need to understand that each loan type was built to suit a purpose. Commercial real estate loans are for buying properties, and some, like the SBA loan, require the properties be for your own facilities, not sources of passive income. Equipment loans are similar—they can only be used for equipment. There are versatile types, like hard money loans and other unsecured loans, but they are rare in the business world compared to secured loans. Instead of providing a lot of loan options for unsecured loans, many lenders focus on alternative lending options.
There are times when a hard money loan is simply the best option, though. It avoids financing against an asset like your merchant account, and if you are planning on putting money out in the short term so you can leverage high demand because of a seasonal event, it can be your least expensive option. If you don’t want a short-term loan, that’s when understanding your cash advance and alternative funding options means understanding which resources to tap when. Factoring and asset-based lending provide you with ways to access credit or cash as needed to cover everyday expenses, and that lets you save your applications for long-term loans for your long-term projects.
Typically, the more you need to minimize the impact of debt on your monthly overhead to reach ROI, the more you need to investigate long-term loan options. If you need a decision fast and you’re going to be paying the money back fast as well, then you’re going to want to look into either a hard money loan or an alternative form of financing the working capital for the situation. Knowing when it’s best to focus on each form of financing is the key to always having the right tool for the job.
