10 Types of Popular Loans for Your Business

Types of Loans and Funding Options for Business

      Business owners have several loan and financing options available, ranging from traditional installment loans, credit lines to micro loans.

However, every business is unique, and so are their capital needs. Are you new to the industry, have a low personal or business credit score, or are you eyeing certain rates and conditions? There are a number of loan products available.

Study the most common types of business loans available, and find out which type is the best choice for your business.

1. Business Line of Credit

Business lines of credit are similar to credit cards. When this is approved, the business is granted with a maximum credit limit. You can borrow funds at any time as long as they don't spend over the loan limit. You only pay interest on money withdrawn from the credit line.

This type of loan is suitable for: paying unforeseen expenses, solving cash flow problems, and seasonal expenses.

2. Business Term Loans

A term or installment loan is a type of business loan in which the borrower receives a certain amount of money which will be repaid according to a set schedule.

Usually, term loan payments are made every month, but the payment schedule is based on the lender's policy. Each payment will be applied to the principal, or balance of the loan, as well as the interest charged by the lender.

This loan is suitable for growth or business expansion, large one-time purchases such as equipment or real estate, and businesses with a strong loan profile.

3. Short-term Business Loans

Short-term business loans are usually considered low risk, because they have a short time frame. Because of its low risk, this business financing option is a good choice for new businesses and borrowers, with poor credit scores. Most short-term lenders charge a one-time flat fee instead of interest. These loans are suitable for: emergency financing needs, borrowers with bad credit, and borrowers who need cash fast.

4. Personal Loans for Business

Personal business loans are an option for businesses and entrepreneurs who do not have the necessary credit scores or business documentation to qualify for a business loan.

With personal loans, the small business owner uses his own credit score and income documentation to qualify for financing. These business loans are perfect for: entrepreneurs, startups, new businesses, and business owners with strong personal credit.

5. Small Business Administration Loans

The Small Business Administration Loan (SBA) is a federal organization that functions as a resource for small business owners. One of the benefits offered by a small business administration loan is a low-cost, government-backed loan program. (forbes.com)

Business owners don't go directly to the SBA for loans. SBA works with lenders such as banks and non-profit organizations. A portion of the loans offered by lenders are SBA backed, meaning lower rates and better terms for borrowers. This financing option is suitable for business expansion, working capital, debt refinancing, businesses with a strong lending profile.

6. Merchant Advances

With a merchant cash advance, the lender gives the company a cash advance in exchange for a percentage of future credit card sales.

After receiving the merchant deposit, daily payments are withdrawn by the lender from the business bank account. Payments are often based on a percentage of sales, so when sales are lower, the daily payments are lower as well. These business financing options are suitable for: emergency financing needs and businesses with strong daily income.

7. Crowdfunding

With crowdfunding, a startup or small business uses an online platform to raise money from a group of investors. Small businesses offer their ideas to potential investors, and the investors contribute money if the idea is attractive to them. It is important for businesses seeking financing to map out their strategies and promote their campaigns to attract investors.

8. Invoice Financing

Invoice financing is used to deal with cash flow problems caused by unpaid invoices. Borrowers can sell outstanding invoices, or use them as collateral in exchange for cash up front.

Invoice financing relies on paying your customers — not your business — this type of financing is a good choice for Businesses experiencing cash flow problems due to unpaid invoices, first-time businesses and bad credit borrowers.

9. Micro Loans

A micro loan is usually defined as a loan under $50,000. Since these are small loans, they are best suited for small businesses, businesses that only need a small amount of money, sole proprietors, and startups that have lower capital requirements than other businesses.

10. Working Capital Loans

Businesses that need help covering day-to-day operating expenses need working capital loans. This short term business loan can be used for seasonal businesses and other businesses that need access to capital until their income increases again in the future.

You can get a working capital loan from a number of online lenders and traditional financial institutions. These financing options may be available as an SBA loan, a term loan, a line of credit or factoring. Because of the many choices, the terms of your loan also vary.

Tips to Pay off Personal Loans Faster

Ways to Pay off a Loan Early

     Did you know there are simple but effective tips that you can use to pay off loans?

This way, you can pay off your car loan, mortgage, credit card debt, and other loans quicker than you might think. These tricks don't hurt your finances in a dramatic way, but they can make a big difference to the total interest you'll pay over the life of the loan, and help you become debt free faster.

Is it Good to Pay off Personal Loans Faster?

Paying off a personal loan faster has its advantages and disadvantages. On the one hand, you save money in interest when you pay off debt early, and your debt-to-income ratio will drop.

However, some lenders charge a prepayment penalty for early repayment, and using your spare income to pay off your loan early means that it won't be available for other fees. And, making your monthly minimum payments on time improves your credit score.

How to Pay off Your Personal Loan More Fast

Make biweekly loan payments

Instead of making monthly payments on your loan, send a half payment every two weeks.

The advantages of this method are:

- Your loan repayments will be made more frequently, so less interest can be charged.

- You'll make 26 half payments each year, which means an extra full payment that year, thereby shortening the loan term by months, or even years.

If you go this route with a 30-year mortgage, you can shorten it to 26 years.

Raise your revenue with part time jobs

If you want to pay off loans faster, increasing your income could be just the ticket. And if you're not getting a raise at work, you may need to take matters into your own hands, and get a side job.

You have different options, and the side job you choose depends on your skillset and the type of job you like. (fool.com)

Collect your monthly payment

Round up your monthly payments to the nearest $50 for an easy way to shorten your loan. For example, if your car loan is costing you $210 per month, increase that number to $250. The difference is too small to significantly reduce your budget, but large enough to reduce your loan term by several months and save a significant amount in interest.

Refinance your loan

Best method to pay off your loan quickly is by refinancing.

If interest rates have fallen since you took out a loan, or your credit has increased drastically, this could be a smart choice for you.

It is important to note that refinancing is the most reasonable way to help you pay off your loan faster. You can do this by shortening the term of the loan, an option that you may be able to purchase easily, at a lower interest rate.

Another way for the same purpose is to keep your loan term unchanged, and with your lower monthly payment, use one of the methods mentioned above to shorten your overall loan term.

Make one additional payment each year

If the thought of bi-weekly payments seems intimidating, but you like the method of making an additional payment each year, you can achieve the same goal by making only one additional payment a year. This way, you'll only be feeling the pressure once a year, and you'll still be shortening your loan term by months, or even years.

Use a job bonus, tax refund, or other windfall to make the once-a-year payment.

Another easy way to make those extra payments is to spread them out throughout the year. Divide your monthly payment by 12, then add that cost to your monthly payment for the rest of the year. You'll make extra payments in full throughout the year.

Tips for Entrepreneurs Seeking Business Loans

Top Advice for Those Seeking a Business Loan

      Business loans are generally more absolutely important to the prospects of a fledgling company or any enterprise aiming to grow.

However, the market for business loans has changed drastically in recent times, as banks, which once dominated almost the entire financial services sector, have shrunk from the lending arena to leave alternative financing options emerging to meet the increasing demands and needs of SMEs.

Looking for a business loan does seem difficult. However, if you have a well-thought-out business plan and put in a lot of effort, you're sure to find one.

Make sure you can fulfill everything you need when finding a source for a business loan.

Capital is indeed one of the most important things that must be fulfilled when you want to start or develop a business. If you haven't met the capital, you can make a business loan. Without capital, a business to be initiated or to be developed cannot run. There are a variety of ways you can get a business loan.

How to Get a Business Loan

The following is how to find business loans that you can do:

Borrow from the Bank

The first way to look for a business loan is to borrow from a bank. However, banks usually rarely lend funds to new businesses, banks will prefer to provide business loans to businesses that have been established and have been running for a long time.

Also, if you borrow from a bank, you must provide proof of the financial health of your business. This is necessary so that the bank can ensure that you are able to pay the loan repayments every month.

Usually, when you borrow at a bank, the bank will offer multipurpose loans, namely loans with collateral. You will need to provide collateral, even if your business' financial statements show that you can afford to repay the loan.

Consider all options

Business loans are not only available to familiar banking groups, who may view loans as the only possible way to finance. In fact, it is very important for businesses to be open-minded and consider the various funding options and loan facilities available today.

The reality of today's business loan market is that lenders know that there is a strong demand for every line of credit they can offer. This is not to argue that there aren't options available to businesses seeking suitable terms, but just to warn against expecting too much when it comes to borrowing money at low interest rates.

The prime rate figure on business loans is designed to be an attractive proposition.

However, it could be that what looks good, may not suit your company's needs. So don't be persuaded easily.

Find out how many Business Loans you Need

There are a number of different SBA loan programs, each with a specific focus.

504 loans are for buildings, land and renovations, for example, Export Express loans help small businesses develop or expand their export market in an efficient financing. By far the most popular are loan programs that allow you to borrow up to $5 million, with repayment terms of 10 years (loans for real estate can be extended for up to 25 years).

Maximum amount of SBA loan

Up to $5 million: CAPLines, International Trade loans, Export Working Capital loans, 504 loans

Up to $50,000: Microloans

Up to $250,000: Community Advantage

Up to $350,000: SBA Express loans

Up to $500,000: Export Express Loans

Up to $2 million: Disaster loans (forbes.com)

Be honest with potential lenders

There's little to be gained from hiding the truth about your organization's financial history while you're going through the loan application process.

Corporate credit reports ensure that key information about your business is made available to related parties,

It's much better to be open and honest with potential lenders, and find out what options are available to your company as is, not as you want.

How to Buy a House Without Money

Ways to Buy a House Without Down Payment

      Buying a home is easier than most people think. Forget about tens of thousands of dollars to become a homeowner. You no longer need a down payment of 20% to buy a house.

In fact, there are no no-down mortgages available to you right now.

If you're wondering how to buy a house without a down payment, this article is right for your journey to home ownership.

40% of potential buyers said that saving for a down payment was their biggest obstacle to owning a home. Considering the average home selling price of $360,000, the average first-time buyer will spend $25,000 on a down payment. But you could buy a house without that $25,000.

There are resources for down payment assistance that provide an actual means of home ownership. The bill currently awaiting a vote in Congress will offer a $15,000 tax credit and a $25,000 grant to first-time buyers.

If you're wondering if now's a good time to buy a house with no down payment, you don't have to wait for new federal laws. Here's how you can buy a home with no down payment, right now.

How to Buy a House Without Down Payment

If you could live in your first home for zero bucks, would you still rent?

There are also down payment assistance available to help you get a mortgage without spending any money. Federal, state, and not-for-profit agencies—and even mortgage lenders—offer grants and loans to support first-time homebuyers.

Down Payment Assistance for First Home Buyers

A down payment assistance (DPA) can help you buy a house without cash right away. It is one of several federal, non-profit, and state programs for first-time home buyers.

USDA Loans No Down Payment

USDA loans have no down payment or minimum credit score requirements. These loans are made to increase home ownership in rural areas, these loans provide subsidized interest rates.

Applicants must be able to prove creditworthiness, as lenders require a credit score of 580 or higher in order to apply.

The requirements for a USDA loan applicant are as follows:

- Legal permanent residents of the US

- Proof of creditworthiness

- Reliable income

- Have a household income of 115% of the average income of the area, or lower

- Have a primary residence in rural areas

USDA mortgages can be used to purchase the following types of property: existing homes, production homes, new construction

townhouses, and condominiums, short sale.

Buyers are usually responsible for closing costs, lender fees, and mortgage insurance, although there is an opportunity to cover some of these costs by your seller or lender.

You can accept seller concessions and lender credits, where the seller and lender will pay some, or all, of your closing costs.

Conventional 97 Loans Program

Conventional Loans 97 from Fannie Mae allows borrowers to secure conventional loan mortgages for a 3% down payment.

No personal contribution required. Mortgage gifts, grants, and other DPAs may cover your down payment.

Conventional 97 Loans are an alternative to FHA loans, have less upfront costs, and no permanent mortgage insurance requirements.

Conventional 97 Borrowers must meet the following criteria:

1. Mortgages must have a fixed rate of interest

2. At least one borrower must be a first time home buyer

This loan cannot be used to buy production houses. Eligible property types include single-family homes of up to 4 units, condominiums, and planned developments.

VA Home Loans Without Down Payment

VA loans provide a way to purchase homes for US military members and veterans.

Like USDA loans, VA loans do not have a down payment requirement or credit score, although most lenders prefer a credit score of 580 or higher. (rocketmortgage.com)

You must have a certificate of eligibility (COE) in order to apply for a VA loan. This is to certify your career history and current duty status, to prove that you are qualified.

VA Eligibility Requirements

You are serving 180 days of active peacetime service

You are serving 90 days of active wartime service

You served six years in the National Guard

You are the spouse of a service member who dies in the line of duty, or is disabled, as a result of service.

A VA insures loans against loss with rights, which is similar to private mortgage insurance. This allows lenders to offer no-down-payment purchases with less risk and lower rates.

VA loan borrowers are exempt from certain closing costs, such as attorney and underwriting fees.

Conclusion

Low down payment and no down payment mortgages make home ownership possible for first time home buyers.

Find out which loan suits your condition, about how to buy a house without a down payment.

Then, get pre-approved for your mortgage of choice, once you're ready to start your house hunt.

How to Apply for a Business Loan to Get Approved

Has Your Business Loan been Rejected? Here are Tips for Applying for a Business Loan to Get Approved

      For some, having a business is a dream. However, sometimes, not all dreams can go smoothly. Many factors cause this to happen, one of which is a lack of working capital.

In fact, capital should not be used as a reason for you to bury your dream of starting a business.

Currently, there are many sources of loan funds that can be accessed easily, such as banks and other financial institutions that provide loans. That way, the business idea you have designed can still be realized. 

A business loan can provide the funds you need to operate your business, cover day-to-day expenses, and purchase equipment. If you have never applied for a business loan, you may not be sure where to start or what documents are required. (forbes.com)

Then, how to apply for a loan to be approved? Here are some tips to apply for a loan.

Tips for Applying for a Business Loan to Be Accepted

Fulfilling Loan Application Requirements

Every bank or financial institution that provides loans has different terms and conditions for providing loans.

Generally, here are some of the conditions that are usually needed when you will apply for a loan:

- Personal ID card

- Income or salary slip

- TIN

- Passbook

- Documents of ownership of collateral, certificates (if taking a loan with collateral)

In order for your loan to be approved, make sure you have prepared the required documents in full.

Explaining Business Prospects

The next tip for applying for a business loan is to explain the prospects for the business you are running.

This is important because the bank will usually consider several things regarding the data of the prospective borrower before agreeing to it.

Give reasons why you are applying for a loan clearly. This is intended to convince the bank or financial institution where you apply for a loan.

One of them is by providing details of your business goals, explaining the type of business you run, and showing your seriousness in opening or developing the business so that the loan can be approved.

Apply for a Loan as Needed

Before approving a loan, the bank or financial institution where you apply for a loan definitely doesn't want to take the risk by providing loans to customers who are judged to be unable to pay them off.

Usually, the bank also has certain criteria and conditions in terms of risk management, related to lending in accordance with the financial capabilities of the borrower.

For that, for those of you who want to apply for a business capital loan, as much as possible apply for a loan in accordance with your ability to pay it.

Make Sure Your Credit Score Is Good

What is a credit score? A credit score is a credit scoring system to make it easier for banks or other credit service providers in selecting the ability of prospective customers to pay off loans.

If you have a good credit score, the bank will certainly consider you for a loan. On the other hand, if the credit score is bad, the bank will certainly not take the risk of providing a loan.