It’s no secret that businesses need capital to stay afloat, especially small businesses. In fact, many small businesses fail because they do not have the capital they need to cover their day-to-day activities. The good news is there are many loan options for small business owners. Let’s talk about the pros and cons of three of the most common financing options for small businesses.
Pros and Cons of Different Loan Options for Small Businesses
- Traditional Term Loans. First, when you think of the loan, you think of a traditional term loan. The good part about traditional loans is that you get cash upfront for your business, you can borrow high amounts, and the funding is fast. On the other hand, you may have to put up collateral for this type of loan.
- SBA Loans. Next, every small business owner has heard about SBA loans. SBA, or Small Business Administration, loans are another popular option for small businesses. They offer some of the lowest rates on the market, the ability to borrow up to $5 million, and long repayment terms. Unfortunately, these loans can be difficult to qualify for and they have a long and intense application process.
- Lines of Credit. Finally, business lines of credit are a great funding option for businesses that need a more flexible way to borrow money. Business lines of credit will provide access up to a credit limit, allow you to repay it on your own schedule, and only charge interest on the amount you have borrowed. The downsides to lines of credit are that you need to have a strong revenue and credit history and they may carry additional costs such as maintenance fees.
Capital is integral to business success because if you don’t have money, you have no way to keep your business running. However, many people cannot fund their businesses out of their pocket. If you have a small business, and you are curious about your funding options, you can contact Aspen Commercial Lending and our team of financial experts can help you decide on the right financing plan for your business.
You could have a part 2 to this one, but if we do that, let me know.