How to Know What Business Loan is Right For You

Not every business loan is created equal. From revolving lines of credit to unsecured loans to alternative financing, any business owner considering the available credit options finds that there are many to choose from. With all these options available, it can be difficult to choose the best fit for your business needs.

 1.Unsecured Loans

Available from both traditional banks and alternative lenders, the unsecured loan is a basic, mid-sized option for businesses that need cash for a specific purpose. For example, if you are running a retail operation and you need to make a large inventory purchase, an unsecured loan would allow you to have a no-collateral loan for the purchase that can easily be paid off after the inventory is sold.

 2. Secured Loans

Secured loans work much like unsecured loans do, except that there is collateral attached to them. The extra security offered by these loans usually comes with longer repayment terms, lowered interest rates, or both. This type of loan is the easiest to gain approval for in most cases, but traditional banking institutions can take 30 to 60 days to approve them.

3. Revolving Credit Lines

If your business finds itself short of cash sometimes, especially when you are actually quite busy, then an open credit line might be right. Lenders offer these lines at various rates, depending on the business’s credit history and income. These options are usually not the best for businesses looking to expand, but for those who often experience a cash-poor period while invoices are outstanding, this kind of business loan can really help. Revolving credit lines can take many shapes, too, from credit cards with cash withdrawal options to direct lines of cash.

4. Alternative Loan Formats

Alternative lenders, such as private corporate institutions, make a practice of innovating new credit options for their business customers, and they also specialize in fast approval. Many of these options can approve your loan in as little as 48 hours, and the terms of repayment are often customized to the particular needs of the client. Since these kinds of loans are constantly being innovated, they do not necessarily have a single format. Sometimes, they are simply flexible versions of the products listed above. Inquiring with an alternative lending company’s loan agents can give you more details about their particular products.

Over the lifetime of your business, it is quite likely that you will find yourself using more than one of these options. Planning ahead and knowing the best use for each style of business loan can help to ensure that your credit options are always a great match for your business’s needs.