Type of
Small Business Loan
Whenever you're starting a small business, or
your may need loans for your small business, you will be wondering
what are
the loans available for small business.
Probably, you need funding a small loan for small business
investment in hardware or software, eg. machinery, equipment,
furniture, computer, goods inventory, renovation or even for working
capital. You need to understand what are the type of business loan
that suit your business loan purposes.
Small Business Loans come in various forms, and are widely
available. They can provide a very flexible solution to any type of
funding requirement.
1. Micro Loan
Normally from $5,000 to $35,000 loan for small business that can be
used for any business purpose. Micro loans are small loans which are
provided to help start up newly established businesses. Generally,
the maximum term of a micro loan is six years with different credit
requirements. Some form of collateral must be given to the loan
provider, as well as a personal guarantee from the business owner
presented. There are some basic requirement.
2. SBA Loan (in USA)
Loans to small businesses from private-sector lenders (banks, etc.)
which are guaranteed by the SBA. If you are resident in USA. This is
a loan where US Government partially guarantees repayment to the
Bank. SBA loans are used when the business is slightly outside a
Bank’s standard lending criteria. A business must qualify for
financing through a bank (using regular banking guidelines) and gain
further approval from the SBA prior receiving any money. Under SBA
Loans, there is many different loans designed for different business
purposes. Further details, need to check with SBA Loan details.
3. Operating Loan
Operating loans serve purpose of working capital loans, line of
credit or overdraft protection. These are the loans that fluctuates
with daily cash flow needs of a business. The maximum amount you may
borrow for an operating line is primarily based on accounts
receivable. Cash businesses such as restaurants and retail stores
generally do not qualify for an operating line. Inventory is not
generally financed (but exceptions are made frequently)
4. Term Loan
A term loan is a loan that has monthly principal and interest
payments. The outstanding principal amount decreases each month.
Generally, term loans are established to assist in financing long
term assets. The amortization period should closely match the useful
life of the asset purchased. Most term loans have an amortization
period of 5 years or less (but there are exceptions).
5. Franchise loan
Many franchise companies either offer monetary assistance or help
franchisees find a lender. Franchise Financing Specialized financing
reserved for the franchisees of recognized, typically nationally
known, franchises.
6. Export Loan / Export Financing
Export financing of U.S. goods and services through a variety of
loan, guarantee, and insurance programs. These loans support export
financing to small businesses when financing is not available on
reasonable terms. Export financing encourages lenders to offer
export working capital loans by guaranteeing repayment of a loan in
a timely manner
7. Lease
The requirements for a lease are similar to a term loan as the risks
to a financial institution as identical. There can be tax benefits
applied to leasing. Leased goods are generally owned by the
financial institution or a 3rd party. The amortization period should
closely match the useful life of the asset purchased. The value
placed on an asset varies depending on resale value and the type of
asset leased.
8. Corporate Visa Expense Cards
Corporate Visa Expense cards are held under the name of the business
for use by employees. A company should ensure that all authorized
cardholders have a clean credit history. Typically, established
companies have unsecured Visa cards where the assets of the company
and personal net worth of the owners are pledged as security.
9. Merchant Account
Merchant Visa risk applies to unsigned Visa drafts such as taking
orders through the Internet or telephone. Risks occur to financial
institutions due to fraud. Shop around, many Banks do not require
security for Merchant Visa and many E-Commerce Internet sites have
online applications for an account.
10. Mortgage
This is a term loan secured by a building on a piece of land. The
maximum amortization period varies greatly between Banks - from 10
to 30 years. Your business must still meet standard lending criteria
such as debt serviceability. In general, a business mortgage is more
complicated and more expensive than your personal mortgage. Many
Banks will require you to pay for a full property appraisal,
environmental audit, and legal fees in additional to regular Bank
fees.
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