After keeping the idea of owning an apparel business on hold for 10 years; finally, last year I decided to give shape to my long-held dream. Even though I received financial support from my near and dear ones to bear the initial cost of setting up the business, I soon realised, that to sustain the business, I will require a steady flow of funds. And, that’s when my good banker friend introduced me to different types of business loans as shared below:
• Term loan – With this commercial loan, you can avail a lump sum of the fund to support your business needs. You will have to repay the availed loan inclusive of the interest rate, over a pre-decided time frame.
• Short-term loans – These types of business loans will avail small quantum of the loan compared to term loans. But, it is ideal if you need a small amount of fund. Remember, the repayment term is also shorter for these loans.
• Personal loan – This can be a good option for start-up funding if your requirement is for a small sum of money. However, this loan will give you the freedom to use the fund anyhow you wish to for the benefit of your business.
• The line of credit loans – It is a short-term business loan and is one of the most useful types of loan for small-business owners. This loan protects your business from emergencies and slow cash flow. It is mainly to meet inventory needs and operating costs for working capital and the business cycle, but not for the purchase of equipment or real estate. The line of credit loans usually attracts low-interest rates as they are considered as low-risk loans.
• Equipment loan – An equipment loan will finance up to 100% of your business’s equipment and machinery cost. And, interestingly, the equipment itself acts as collateral. So, if you need specific equipment and machinery for your business to take off then this could be a good choice.
• Invoice financing – This type of loan lets you use your outstanding invoices to get a cash advance from a lender. This could be one of the best options if you are facing cash flow problems because you can’t put your business in a standby mode until your customers clear the payments. And, you know that number of payments you have to make to keep your business running such as rent, salary utility bills etc.
• Business credit card or business charge card – The function of a business credit card is similar to a personal credit card where you have a maximum credit limit and have to pay the spent amount by a particular date. On the other hand, a business charge card neither has a spending limit nor any interest. But, you will have to clear the entire balance by the end of every month. So, depending on your need and convenience of payment, you can opt for either one of the cards. Well, short-term loan best fitted my business requirement. I hope you find your perfect business loan too.