Summary: There are 5 basic business loan types – Business working capital loan, equipment financing, merchant cash advance, a line of credit, and franchise loans for start-ups.
Descriptions: Most young entrepreneurs think that a business loan is similar to any other personal loans except it is facilitated for business operations. However, it is a wrong belief. In fact, the entire structure of business loan from loan application to final closure, it is entirely different from a personal loan. Also, there are various traditional loan options and alternative crowdfunding methods out there to choose from.
Are you looking for Loans to Fund your Small Business? Here is a List of 5 Business Loan Types you can Avail.
1). Business Working Capital Loan:
It is the most basic type of business loan availed by companies. The business working capital loan is a short-term solution to provide business required cash flow to maintain its operations. It fundamentally helps businesses to keep the daily business operations going while they search better ways to generate the revenue. You can apply to banks as well as Peer to Peer lending platforms to apply for this type of financing. On the downside, this loan comes with higher rates and shorter repayment tenure.
2). Equipment Financing:
Equipment loans provide capital for office equipment, such as a machinery, furniture, vehicle, computers or things such as copy machine, scanner, printers, and other basic tools. Instead of paying upfront for equipment, business owners can break the cost of purchase in the form of EMIs. P2P lending platforms provide Loans for Small Business without collateral. It helps to preserve the business cash flow since you no longer require a hefty down payment to bring in the business equipment.
3). Merchant Cash Advance:
This loan is offered to a business based on the volume of its monthly credit line transactions. You can receive a loan of up to 125% of your monthly transaction volume. Some businesses also take a fixed amount of money out of a merchant account to maintain the operations. The loan repayment terms and amount may vary from lender to lender. These are easy to obtain and with Online Loan Apply process your loan application will get processed digitally.
4). The Line of Credit:
Just like a working capital loan, the line of credit provides capital for day-2-day money needs. Not recommended for larger purchases, the Line of Credit can be availed for as short as 6 months to as long as 3 years. Rather than paying the entire amount, with this type of financing you can take out money whenever you need and pay interest only on what you use. These loans are unsecured and don't require collateral as a security. With a longer repayment period, you can build a good credit rating if you keep paying the interest payment in a timely manner.
5). Franchise loans for start-ups:
These loans are best for start-ups needing capital to open their own franchise. Every financial institution facilitates such loans. These can be used to pay a franchise fee, purchase equipment, and build new stores.
Faircent is India’s leading Peer to Peer lending platform. Our mainstream services are a personal loan and business loan. With Faircent businesses are getting low fixed interest rates on loan with ZERO collateral.