There are over 30 million small businesses in the United States which comprise 99% of all companies domestically. If you’d like to join the millions of entrepreneurs that are out there working for themselves and making their own way, you’re going to need money to do it. One way to succeed in this is to use some of the available types of business loans on the market.
Why?
Because starting a business requires having cash for payroll, equipment, space, and more. Fortunately, there are several types of business loans that can help you get your hands on the money that you need to bring your business dreams into reality.
Below, our team shares four common sources of money that might benefit a new entrepreneur.
1. Line of Credit Loans
One of the most common types of business loans that you can get is a line of credit. This loan product is issued through banks and gives you access to a bulk sum of money to help with operating expenses throughout the year.
You can pay off the principal on a line of credit at your convenience. The only payments that you’ll be mandated to keep up with are payments on interest.
2. Investments
Believe it or not, there is a class of business loans that you’ll only need to pay back if you’re successful. This type of loan is called an investment.
Investments are given out by wealthy people/firms that believe in a business’s growth potential. Investors contribute a certain amount of money to a company to get it off of the ground in exchange for partial ownership.
If your company does well, your investors share in that success. If your company fails, your investor loses their investment and you’re not liable to pay them back unless negligence was a factor in your business’ failure.
3. Installment Loans
Installment loans are common products that you take out from a bank or an online lender. With these loans, you’ll make monthly payments on your borrowed money which will progressively pay down your loan’s principal and its interest.
While installment loans aren’t as flexible as getting lines of credit from a bank, these loans still give companies the assistance they need to get through times where cash flow becomes challenging.
4. Invoice Loans (Factoring)
If your clients don’t pay off your invoices for months as part of their standard operating procedures, you may find that you don’t have the cash necessary to run your new company. Invoice loans/factoring services present the solution to this problem.
With factoring services, you can sell your unpaid invoices to a lender that will pay you their full amount less 2 – 5% (usually). The factoring service will then wait to be paid the full amount by your client.
Now That You Know Popular Types of Business Loans, Pick the Best One for You
Very few people are able to start successful companies without borrowing the money they need. We hope that the types of business loans that we’ve shared with you give you the insight that you need to move your entrepreneurial dreams closer to reality.
If you need more advice on finance and business ownership, consider browsing more of the newest content that we have featured in our start-up-focused blog.
