The Many Types Of Small Business Loans

By Author: Stam Bett
Total Articles: 452
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Small business owners today are fortunate in that there are many options for financing to increase working capital and get your business off its feet, or spur new growth. Despite these many options, small business owners still consider financing to be one of their major challenges, particularly entrepreneurs. In fact, many experts estimate that about 90% of brand-new businesses fail simply for a lack of capital, or funding.

Start Up Business Loans
If you're just getting your first business started, you need money to lease a building, by supplies and products and get your business off the ground. A popular option is small business administration loans, which are government loans you may be eligible for. These government small business loans are especially easy to get if you've served in the U.S. military or you're a minority.

Small business administration loans are not made directly by the Small Business Association, although the SBA does set guidelines in place for loans by its partners, including microlending institutions and other lenders.

Conventional Small Business Loans
Conventional small ...
... business loans are made from private lenders. These loans are usually for larger amounts and the terms are based on many factors, including what you need to borrow the money for. Unfortunately, these are no small business loans for bad credit, so if your credit is less than perfect, you probably do not qualify for a conventional business loan.

Accounts Receivable Factoring
This is a fairly revolutionary type of financing for small businesses and it's based on the health of your business, not your personal credit. These bad credit business loans are an alternative to asset-based loans and provide you with much needed capital. Factoring isn't actually a loan but a purchase of your accounts receivable. A factor will buy your invoices based on your customer's credit, advancing you between 75 and 80% of the receivable, or what your customer owes, and the remainder when the bill is paid. A factor will also process your receivables, allowing you to outsource your accounts receivable function.

This option is used by business-to-business companies, particularly those with a great deal of volume. Many other businesses turn to this solution as well, including construction and medical companies.

Line of Credit Loans
Finally, these small business loans are short-term loans that give you access to a specific amount of money. The money is deposited into your business account as needed and you pay interest on the amount you borrow. Lines of credit small business loans are excellent as start up business loans or for established businesses to pay operating costs, increase working capital and buy inventory, although they are not for buying equipment or real estate.

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