As a small business owner, you know how difficult it can be to make ends meet. You may often feel like you have more expenses than income, and sometimes this may actually be the case. There are instances, then, when you might have to supplement your regular income with a loan. To prepare for such an occurrence, you should know the options available to you.
SBA Loan
An SBA loan allows you to borrow a sum of money, usually from $25,000 to $5 million, through a traditional lender but with the guarantee that, if you should fail to repay, the government will cover for you with the lender, at least for a portion of the loan. That said, though, you will have to put up your personal property as collateral, so if you cannot pay your loan, you could lose much of what you have. You do, though, have the advantage of paying over many years.
PPP Loan
The Paycheck Protection Program is specifically designed to help cover payroll costs or hire employees back after layoffs. Before you fill out a PPP loan application, though, make sure that the program is up and running as it is sometimes unavailable.
Business Term Loan
A business term loan is designed to help you expand your business. It can fund equipment purchases, more staff or greater working capital. These loans generally need to be paid back in one to five years and typically run between $5,000 and $2 million.
Business Line of Credit
The business line of credit is something like a revolving loan. You can draw on a particular sum of money as you need it rather than taking it all at once. You can draw again if there is money left in the line of credit, or you can pay back what you’ve drawn and then borrow again until the credit term is over. A business line of credit allows for a great deal of flexibility. You can use the funds for immediate expenses or for additional growth, pay them back and then have them available to you again. Also, you don’t pay interest until you actually draw the money.
Short Term Loan
If you need money in a hurry to make a repair or get through a rough patch, then a short term loan might be right for you. If you have a good credit score, you can access money quickly, but you will also need to pay off your loan quickly, typically in one to three years. You may have to put up some collateral, too, and you should watch for high interest rates.
Merchant Cash Advance
A merchant cash advance is also a quick way to get funds, for it lets you borrow based on your projected future earnings and then pay back the loan by giving the company a percentage of your daily receipts. Interest rates can be quite high with this type of funding, but it might work well in an emergency.
While taking out a loan is not something you generally want to do as a business owner, it may be necessary at times. So know your options, and do your research to make the best possible decision for your business.
Daniel Bailey is a known content writer from California, USA. He writes content in different niches such as social media marketing, finance, business, etc. He’s a day time blogger and night time reader currently working for some blogs. He enjoys pie, as should all right-thinking people.
