Are you ready to apply for a business loan?
Whether you are in need of capital to expand your current business, or need money to start a new venture, applying for a business loan can be confusing, time consuming, and expensive. If you have bad credit or no credit at all, getting a business loan can be even more difficult and expensive. It is important that you understand how business financing works before you apply for a business loan. There are several types of business loans, and these types depend on the type of business you have, your ability to pay back the loan, and the amount of money you are asking for.
Small Business Lending – This type of lending is perfect for growing small businesses that have limited income from customers but strong business potential. These loans are made based on your personal credit history, as well as your plans for expansion. Answer a few questions to determine which small business loans you qualify for. The application process is simple and fast, and typically it won’t affect your credit negatively.
Interest rates will usually be slightly lower than for bank loans
SBA Loans – Small business owners apply for this type of financing through the Small Business Administration. As a small business owner, you will likely have little credit to speak of, but your business may be eligible for this type of loan. Interest rates will usually be slightly lower than for bank loans, since small business owners don’t have the same financial power as larger companies. Many SBA loans are backed by a risk-banishment policy, meaning that if the company fails, the lender loses the investment. Most borrowers must prove that their business will succeed beyond the loss of the investment.
An Interest Only Loan – An interest-only loan allows borrowers to gradually pay down their debt by paying less interest over time. Each month, the amount due is smaller, so your debt continues to reduce until you’ve paid off the entire loan. The advantage of an interest-only loan is that the monthly payments are often lower than with a repayment schedule. You’ll also have more flexibility when negotiating terms with the lender.
financing has a fixed payment term
Payment Term Amortization Schedules – This type of financing has a fixed payment term that you and the lender agree on. The monthly payments will remain the same for the duration of the loan term. The longer the term, the lower the monthly payments will be over time. However, you should take into account any increase in your gross profits during the term, as well as any change in tax laws that could affect the size of your monthly payments.
Amortization Scenario – This calculator can be used to project your monthly payments, including any interest rate, over the life of the loan. Enter the interest rate, loan amount, the amount of monthly payments required, and start adding up all the numbers. This gives you the amortization table, which can be used to find out what the monthly payments would be at different interest rates and loan sizes. The numbers will help you decide whether a certain amount of additional money will be useful or not, depending on your situation. There are other calculators that use similar concepts but allow you to run the numbers in a variety of ways.