26 Aug LOANS: THE DIFFERENT TYPES

There are varying kinds of loans, and they include cash flow loans, microloans, bank loans, Business cash advances, asset-based financing, and even mezzanine financing, and more.

THE TYPES OF BUSINESS LOANS

BANK LOAN

This type of business loan is gotten from the bank, and it can be unsecured or secured. The secured type of bank loan needs collateral that may get lost of a business can’t repay the loan.

To get this loan, the bank will want to see the business plan, accounts, as well as their balance sheet. The credit history of the business will also come into play. A business can also get loans from the credit unions.

SBA LOANS

The second is the Small Business Administration Loan, (SBA.GOV). The US SBA usually doesn’t give out loans but only guarantee those loans done by different lenders.

The SBA has loan programs of express and standard alternative. You could get 504 loans, microloans or even disaster loans.

MEZZANINE FINANCE

This type of loan gives the lender the opportunity to turn the debt owned by the firm into an equity of the firm.
If a company can’t pay its loan in full or in time, the lender will have no choice but to get a percentage of ownership to the business. This is a way of borrowing that doesn’t put a firm’s property as collateral.

ASSET-BASED FINANCE

This type of lending is one choice open to businesses with low credit score, as well as a bad track record. This form of lending involves borrowing using one’s assets. The lender is usually interested in the collateral’s quality, instead of the credit rating of the company, or its prospects.

A company can borrow using various kinds of assets, and they are stock, plant, premises and so on.

INVOICE FINANCING

Since it is hard for small and medium businesses to get traditional loans, they can opt for invoice factoring or be discounting. Here, the business borrows using outstanding invoices, and can only obtain new sets of funds when a new invoice is created. A business can opt for discounting or factoring based on its needs.

MICROLOANS

They are smaller loans, and banks give these loans based on a firm’s credit history or score. The amount is usually below a hundred thousand dollars. Not minding the amount, banks and even alternative lenders usually do not give out these loans without assurance that the loans would be paid back, hence the demand to see the company’s credit score or history.

Opt for the loan that suits your company in every aspect. Some may allow your business to grow, and others would restrict your cash flow, hence reduce the growth of your company.

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