It can be daunting to consider different financing options, and hard to figure out what type of funding might be the best fit for your business.
Determine if a Loan is Necessary
Taking out a loan is a major decision.
A good first step is to assess if your business needs a loan. If your business has stalled and can no longer scale without more funding, a business loan could help you hire staff faster and may increase your profits.
Say, for example, that your cupcake store is a fixture in the community with lines wrapped around the block. Your growth pattern is steady, but you’ve hit a wall and can’t make any changes toward expansion until you have more capital. In this case, seeking out a loan could be helpful if it means you could purchase bigger ovens, a larger mixer, or hire more employees and keep up with the demand.
To learn more about when you business might benefit from a small business loan, read this.
Types of Loans
The loan you choose will impact your long-term financial goals. If you think a loan may be the right step for your business, familiarize yourself with different types of small business loans and their pros and cons. A few are outlined below.
Small Business Administration (SBA) loans usually guarantee that between 75 and 90 percent of a loan will be repaid, making it easier for lenders to get on board and take a chance on new businesses. However, an SBA loan can require more paperwork and fees, may have strict terms on what you can use the loan for, and may require a longer approval process.
Traditional banks are often the lenders behind SBA loans, but they also work directly with small businesses. Commercial bank loans’ interest rates may be lower than their SBA counterpart, and may have a faster approval process. However, repayment terms can be shorter and loans may be more difficult to get approved.
Alternative lenders were once known for extending loans to businesses without a solid credit history.They were also known for having a quick turnaround time to accommodate those in need of fast cash. While these statements still remain true, alternative loans (sometimes called online loans) have significantly expanded their purpose and their appeal.
Advantages of online loans include a higher approval rate for new small businesses, especially for those that don’t have a lot of credit history. The application process and final funding can also take far less time and paperwork than traditional loans. Sometimes, alternative loans have higher interest rates than traditional loans.
QuickBooks Capital allows business owners to apply for a loan directly within QuickBooks. That means your business’ information is transferred over directly to fill in some of the information required on the application, saving you time in finding funding options that might be right for you.