Finance & Lending

 

01 28 2015

Choosing From Different Types of Business Loans

01 28 2015

Choosing From Different Types of Small Business Loans

Business merchant cash advances, small business working capital, loans for equipment – when it comes to borrowing, you have a wealth of options. However, that variety can make choosing which type of small business loan is best for you more difficult.

In order to ensure you obtain the right type of loan, you first have to understand the different options available.

Traditional vs alternative lending

Whereas banks and credit unions used to be the only players in the small business lending game, the landscape has changed drastically in recent years.

“Small business owners are seeing new, alternate ways to access capital and are able to access it at a much faster rate,” Kristy Campbell, director of marketing and communications at small business resources firm Manta, told Fox Business. “While traditional loans are still available, the requirements can be difficult for many businesses – especially those in the early stages – to meet. Newer options offer added flexibility and can more easily meet quick cash flow needs.”

Being able to access funding from new types of lenders was also the topic of conversation between National Funding Founder and CEO David Gilbert and Forbes recently.

“Our one-on-one approach is significantly different from that of a large bank,” Gilbert told Forbes. “Our credit window is wider than what a bank would consider, so we see a lot of people that have been turned down there. Additionally, our process is much faster, so where a bank may take 30 days or even longer to put something together, we can do it in as little as a day. That’s not the rule, but on the other hand it’s not uncommon either. There’s also less paperwork required, which also makes it easier to do business with us.”

A variety of loan options

Besides from where they originate, many differences exist in the structure of the loans themselves.

The most common type of small business loan is arguably the working capital loan. This option is intended to provide small businesses with the funds they need for day-to-day cash flow. This money can be used for everything from inventory and expansion to bill consolidation and advertising.

However, working capital loans are far from the only option available to small business owners.

For instance, merchant cash advances provide businesses with cash but also come with more unique repayment terms than a straightforward working capital loan.

Whereas a standard loan would have some type of repayment schedule, it’s possible for owners to obtain funds through a merchant cash advance and only pay it back as they themselves get paid. This is accomplished through the lender taking a small fixed percentage of daily credit card transaction sales. Many business owners may find this a more suitable option for their enterprise, as it prevents them from having to make payments if their business is not bringing in money.

Of course, equipment leases are a type of loan as well. If a business doesn’t have the funds to purchase needed equipment outright, it can turn to equipment financing to obtain it. This option comes with many advantages, and plenty of business owners turn to leasing even if they do have the funds necessary to purchase equipment.

Just as with traditional loans, there are various types of equipment leases to choose from. However, all of them offer the chance for business owners to keep cash funds from being depleted by a purchase while also enjoying unique tax benefits.

This explains why 85 percent of all companies lease equipment, from general business offices and restaurants to agriculture and fitness centers.

Making a selection

Before you pick your loan option, it’s important to take your specific needs into account. How much money you need, what it will be used for and many other factors can influence which type of loan makes the most sense to borrow.

It’s also vital to weigh your options regarding who to borrow from. Is a potential lender offering you all the money you need? Do they feature flexible repayment options? Is the paperwork simple and straightforward? You owe it to yourself to partner with a lender that has your best interest at heart.

Regardless of your choice, be sure to plan well in advance. Knowing your needs upfront will allow you to avoid numerous headaches and be in a better position to capitalize on your increase in funding.

Find Out How Much Funding You Qualify For

Fields marked with an * are required
By clicking this button I agree to all terms and conditions.

Terms & Conditions

General Acceptance

Any applications submitted electronically shall have the same force and effect as if the application bore an inked original signature(s). The above information, together with any accompanying financial statements, schedules, or other materials, is submitted for the purpose of obtaining credit and is warranted to be true, correct, and complete.

 

US Patriot Act:

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person and business that seeks a business loan.  What this means for you: When you apply for a loan, we will ask for your business name, address, and Tax Identification Number.  We will also ask for your name, address, date of birth, and other information that will allow us to identify you.  We may also ask to see your driver’s license or other identifying documents.

 

For Loan/Merchant Services:

The Merchant and Owner(s)/Officer(s) identified in the application (individually, an “Applicant”) each represents, acknowledges and agrees that (1) all information and documents provided to National Funding, Inc. (“NF”) including credit card processor statements are true, accurate and complete, (2) Applicant will immediately notify NF of any change in such information or financial condition, (3) Applicant authorizes NF to disclose all information and documents that NF may obtain including credit reports to other persons or entities (collectively, “Assignees”) that may be involved with or acquire commercial loans having daily repayment features and/or Merchant Cash Advance transactions, including without limitation the application therefor (collectively, “Transactions”) and each Assignee is authorized to use such information and documents, and share such information and documents with other Assignees, in connection with potential Transactions, (4) each Assignee will rely upon the accuracy and completeness of such information and documents, (5) NF, Assignees, and each of their representatives, successors, assigns and designees (collectively, “Recipients”) are authorized to request and receive any investigative reports, credit reports, statements from creditors or financial institutions, verification of information, or any other information that a Recipient deems necessary, (6) Applicant waives and releases any claims against Recipients and any information-providers arising from any act or omission relating to the requesting, receiving or release of information, and (7) each Owner/Officer represents that he or she is authorized to sign this form on behalf of Merchant.(8) I consent to receive direct mail, faxes, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (9) this request is for business and not for consumer purposes.

 

For Equipment Services:

I hereby certify: (1) the information provided is true and correct, (2) you are hereby authorized to investigate all bank, credit, and trade references, and said references are hereby authorized to release any requested information to you or your nominee, (3) such authorization shall extend to obtaining personal credit profile in considering this application and subsequently for the purposes of update, renewal or extension of such credit or additional credit and for reviewing or collecting the resulting account, (4) this information may be transmitted by us to you and by you to underwriter(s) for the purpose of granting me credit, either electronically or manually, and that by submitting this application, I take full responsibility for transmission thereof, (5) I am over 18 years of age, (6) I acknowledge my rights under the Fair Credit Reporting Act, (7) I consent to receive direct mail, faxes, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (8) this request is for business and not for consumer purposes.

The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into the binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. If for any reason your application for business credit is denied, you have the right to a written statement of the specific reasons for the denial. To obtain the statement, please write to National Funding Inc., 9820 Towne Centre Drive, San Diego, California 92121.  Funding amount and credit approval is subject to a full credit profile review.