5 Types Of Business Loans Available For Small Business Owners

At various times, a small business needs extra capital in addition to incoming cash flows to ensure the smooth running of the business. During an unexpected emergency, a requirement for new equipment or a cash flow crunch, many small business owners decide to take a business loan.

But as every business is unique, so is the need for capital. Whether the business is brand new in the industry, credit scores are low, or there are specific terms and rates to aim; there are many types of business loans to choose from according to the needs of the business. Below given are a few types of loans small businesses can choose to take.

Start-up Loans

Initially, on venturing into a new business, cash flow is required to cover overhead and setup costs. In these cases, start-up loans are a viable option. As the company does not have a loan payment history, banks consider the personal credit history of the founder to establish a CIBIL score. Nevertheless, proof of the company's existence and other financial details are required by the financial institution to create appropriate terms of the loan agreement.

Term Loans

Term loans are the type of traditional loans anyone borrows from a bank. The terms of the loans are set according to individual loan history. Under this, the borrower receives the specified lump sum amount upfront and has to repay in small amounts with interest charged over the specified time. These loans can be borrowed for almost anything in regards to the business.

Line of Credit

In a line of credit, a maximum allotted amount of funds is pre-approved for the business. It can be either a secured or an unsecured business loan depending on the terms of the agreement. As it is an open-ended loan, withdrawing money from the maximum allotted fund multiple times is possible, and interest is paid only on the amount that is withdrawn and not on the entire fund allocated. A small fee for the fund that isn't withdrawn by the end of the year is charged, but it is considerably lower than the interest rate paid on a term loan.

Invoice Factoring

For a business, cash flow represents fuel to your car. It is essential for day-to-day activities. Moreover, with B2B clients, payments can be tied up until clients clear their invoices. When this happens, and a small loan for business is required, Invoice factoring is the ideal loan. Up to 90% of the invoice's amount stated (depends on the crediting institution) can be taken as a loan with a considerably small fee charged on the loan withdrawal.

Equipment Financing or Machinery Loan

Equipment financing is a type of secured business loan. Sometimes, entrepreneurs need to purchase equipment for smooth processes or to buy new equipment or to replace old or outdated machinery. All this requires a large amount of money, and equipment finance loan is an ideal loan for these situations. The interest is usually lower, and the particular machinery bought according to the terms of the agreement is held as collateral.

As India is an emerging market, institutions have realized the importance of supporting and empowering SMEs. ftcash is one remarkable example of the same. They offer quick business loans with minimum documentation and easy repayment options to best facilitate SMEs' cash flow. They also offer both secured and unsecured loans depending on the needs of the business. To know more about how to take a loan from ftcash, what the eligibility criteria and in how many days your loan gets disbursed, click here!

Hope this article will suit your needs well