5 Types of Loan that Can Work Well When Starting a New Business

In starting a business, capital is considered as the most crucial part of making it possible, especially for starting businessmen. It isn’t easy to secure the right amount enough to run your business smoothly. Good thing there are already a lot of resources available nowadays.

Borrowing or loaning money has been the most natural solution to this situation. There are commercial lenders, bank institutions, and online lenders that allow startup businessmen to borrow money. These institutions offer different kinds of loan options that may work for you.

In this article, we will site the different loan options that you can choose for you to start a business.

1- Personal Loans for Business Use

The first on the list is filing for a personal loan. This loan is a popular option in funding a startup business. It primarily works for personal usage, but it is also advisable if you want to start your business. Having a good credit score is the only key that is needed to get fast approval.

What you need to be careful with personal loans is that they commonly have high APRs (Annual Percentage Rate). It is considered as the best option for an individual that has a healthy credit score and high income.

If you are interested in filing a personal loan for your business, there are a lot of online lenders such as CreditMadeSimple that can help you. You can check out their website, and they can assist you in settling your loan right away.

2- Personal Credit Cards

We have seen that credit cards are used in purchasing whether in online shopping, marketplace and on daily usage. But did you know that personal credit cards can also be used in funding your business?

A personal credit card allows you to support your business capital. It also has an inviting rewards points and cash back perks every time you use your card in purchases and even staff expenses.

One thing you should be wary of using personal credit cards is that they have a high limit of APR percentage and low credit limit. Hence, you need to continually check in order not to be burdened with monthly dues. 

3- Installment loans

Other than the personal loan, an installment loan is one popular loan option that works and is easy to apply. An installment loan is given in a lump sum amount that is needed to be paid in a fixed period. The interest rate fee is included in the total amount payable by the borrower.

Pro-tip in managing installment loans is to make sure you apply for a long-term loan with a low-interest rate. Rather than engaging in a short-term loan with a high-interest rate, the latter would surely be a burden for you and your business.

Also, unpopular advice, as a startup businessmen, you need all the help and resources available. You may overlook the support from your family and friend – there is also a great option to turn to apply for an installment loan. You can ask for a low-interest rate and much more flexible payment terms easily. 

4- Microloans

If you were just starting to venture out in growing small businesses like food trucks, mini stalls in the mall, or just a simple pop-up store, you might well consider seeking and applying for a microloan. Microloan effectively works for small and medium enterprises as it offers a short-term loan period with a low-interest rate.

Startup businesses that need $50,000 to run and grow their business, applying for a microloan, is the best option. Since this loan is intended for business with no credit or has poor credit status, ensuring collateral or a personal guarantor is needed.

Having a co-signer in microloan is not that overwhelming since the amount is not that taunting for them. Just make sure to convince them and ensure first that you will secure to pay your loan on time.

5- Equipment Loans

There are different types of business, and yours might need too many equipment purchases like an expensive machine, computers, and other hardware required to run your business. The best loan option for this kind of business is an equipment loan.

This loan is much more fluid compared to other loan options mentioned above. They usually require no down payment and depend on the equipment you are purchasing. And frequently, money lenders are more lenient to equipment loans. With their flexible payment plans, all you need to secure is to pay the loan on time. Otherwise, the lender has the right to claim the equipment and sell it to gain their money back.

If you are uncomfortable being in that situation, you might want to be sure of your decision to get an equipment loan.

Takeaway

Starting a business might be a little daunting for anyone, and having a business is only for tough ones. But getting started shouldn’t be that handful when there are available resources that can help you. You only need to be thorough and decisive on what loan option you will choose. Remember that making your business grow and work is in your hands.

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