Consider These Three Common Loans for Your Small Business
Commercial construction loans, apartment building loans, SBA bridge loans, or short-term business loans, are just a few of types of specific funding for various small to medium-size business. Regardless of the loan type, however, it can sometimes be challenging to get approved for one.
As a bank, financial institution, or direct lender conducts due diligence for approval, there’s a lot of important criteria for business owners to understand well before the loan application process. While every lender has a set of various stipulations, here are a few types of loans, accordion to Fundera.com, which small to medium-size businesses owners may want to consider and what criteria may be required.
Term loans are one of the most common types of loans that small businesses apply for. Basically, a business owner applies for a set amount, and then upon approval, the loan is repaid on a monthly basis, with interest. While a viable option, there is always the fine print to understand and requirements to meet. For example, in addition to many requirements, the basics include being in business for at least one year, have a personal credit rating of more than 600 with $90,000-plus income of annual revenue.
There’s an old adage that states “you’re only as good as your tools.” This couldn’t ring more true and to stay competitive and cutting edge, equipment needs to be upgraded, in excellent working form and maintained for business success.
Equipment loans, as they sound, are used for the purchasing and/or maintenance of new equipment. Upon approval, lenders will finance up to 100 percent of the equipment cost. These loans are not only convenient and affordable, but are less risky for the lender as the equipment is used for collateral. Nonetheless, there certain requirements that need to be addressed including:
- You must be in business for one – two years
- Have a solid personal credit score of more than 600
- Make $100,000-plus annually
With its recent headlines of offering relief to small business during the Covid-19 outbreak, the federally-supported Small Business Association (SBA) loans are very popular. This is because the SBA partially guarantees the loans and is willing to finance a small businesses, and often with better terms. However, even though its less risky for the lender (due to the SBA’s partial guarantee), your business must be in operation for at least two years, generate $100,000 in annual revenue, and have a credit score of 640 or higher before approval.
Starting, expanding or maintaining a business day-to-day is always exciting, but by understanding the criteria of these types loans, chances of approval increase and allow a smoother process and means to conduct business.