Small Business Loans and Online Financing Options for 2020

Many small businesses in the United States are looking for ways to expand their business. This may be by improving their current facilities, or maybe even building a new location. Whatever the case, small business owners depend on small business loans to grow their business. However, before running to a bank or other lender to take out a small business loan, small business owners need to research and consider whether a small business loan is worth it for them. Once they decide that they want to proceed with taking out a small business loan, there are many factors that they must consider. Without proper research, a small business loan can destroy a small business owner’s dreams of expanding their business and increasing profit.

Review Options For Small Business Financing From SBA Lenders

When considering a small business loan, the first place a small business owner should look is the bank that they already have accounts open in. This is a smart idea because the small business owner is already familiar with the bank from previous transactions, making them more likely to feel comfortable and understand the bank’s specific small business operations. Additionally, the bank will already value the small business owner, and therefore is likely to keep their customer satisfied by giving them a good deal on a small business loan. One of the most popular small business loans is a traditional term loan. A term loan refers to any loan which has a fixed term, or repayment period. For a small business loan, the term is usually between four and ten years. However, the exact term varies by the purpose and size of the loan. A term loan is very common for small businesses because it can be used for a wide variety of things. This includes, but is not limited to, the purchase of new equipment, expanding a current building, or even constructing a new facility. The diversity of a term loan is often what makes it so attractive to small business owners.

Online Loans From $5,000 to $500,000 For Small Businesses

Another point to consider when taking out a small business loan is collateral. Collateral is an asset that the borrower puts on the line if they cannot continue to pay back the loan. Therefore, the lender takes position of that asset if the borrower defaults on the loan. Collateral has both its benefits and its drawbacks. On the positive side, small business owners who work collateral into their loan agreement will often be given a lower interest rate. Since the lender knows they will take possession of a borrower’s asset if the borrower defaults on their loan, they are more willing to take the risk of a lower interest rate. Without collateral, lenders will often use a higher interest rate to make sure they make money on the loan. The drawback of course comes into play if the small business owner does not have enough money and is forced to default on the loan. In this case, the small business owner will have to give up ownership of a potentially valuable asset. If a small business owner is confident they will be able to pay back their loan, collateral is less of an issue. If they are not, then collateral may want to be avoided if possible.

 

Although bank term loans are popular for small businesses, there are other options available. Some private lenders are willing to offer lower interest rates than banks for small business owners who have good or excellent credit scores. These private lenders have less money to work with than banks, and therefore want to limit their potential risk. For small business owners with good or excellent credit scores, private small business loans may be worth looking into. Small business owners can further reduce their interest rate by putting down collateral for the loan. This reduces risk even more for the lender, and can often result in an interest rate than is one or even two percentage points lower than a traditional bank term loan.