For business owners who need access to cash, a small business loan will help them out. But it is best to know the right type of loan to apply for. Choosing the wrong type of loan may get you stuck and waiting for months to receive funds when you actually need them fast.
Small business loans can be channelled toward a specific need, such as helping you expand your business or start a new business. Some of the small business loans are obtainable through online lenders, banks, and credit unions. The interest rates, fees, loan limits and terms are determined by the type of loan, lender, and borrower. So, therefore, it is important to understand how each process works, so you can select among the best option for your business, here are some types of loans for your business loans.
1. Term loans
Term loans are one of the most common kinds of small business loans that provide a lump sum of cash that business owners pay their loan over a fixed period. The once-a-month payments will be fixed and the interests included in the amount will be added to the principal balance. The small business owner has the elasticity to use a term loan for different needs, such as everyday expenses and equipment.
2. Microloans
Microloans are small loans that can provide you with up to N500,000 or a lesser amount. Since the loan amounts are quite low, this type of loan is a good option for new businesses owners or those that do not need a lot of cash. Various microloans are obtainable through nonprofits or the government, like that of SBA, though you may need to put up collateral (like business equipment, real estate, or personal assets) to qualify for this type of loan.
3. Franchise loans
Being a franchisee can help you attain your goal of business ownership faster and easier than starting from the beginning, nevertheless, you will still need capital. Franchise loans can offer you the funds to pay the upfront fee for opening a franchise, so you can get up and running. While you are the one taking out the loan through an investor, some franchisors may offer funds to new franchisees.