To run a successful small business, you’ll sometimes need to take a business loan. If you’re not in the finance field, choosing an adequate loan for your business can be a true venture. To overcome such a challenge, we found some of the most popular types of loans for small businesses.
A decade ago, you could only get one of the two types of bank loans for your business. Nowadays, they come in a wide variety of forms and are easier to get than ever. So, choose an adequate loan for your business, apply, and have it approved in no time!
1. Unsecured business loans
One of the most popular business loans in Australia is an unsecured business loan. Unlike secured business loans, this type of loan is easy and fast to get, so it’s extremely suitable for emergencies! They are ideal for small to medium businesses because you don’t have to go through a complex and complicated procedure to get a loan.
How does it work? Instead of loans that require collateral, lenders of unsecured business loans analyse your transactions, finances and other information to determine how much funds can you borrow. The repayment is usually weekly based and happens in 12 months.
2. Merchant cash advance
If you don’t operate with a lot of cash flow, don’t worry, there’s a loan solution for you too! A merchant cash advance is ideal for small businesses as lenders use your daily sales to collect the repayment. This means that you’re borrowing money against your future sales. How does it work?
For this type of loan, you can usually apply online, and receive money in a couple of days. The lender gives you a lump sum you can use. To pay back the loan, the lender will use our daily credit card sales, which may include the fees as well. Even though this may seem perfect for your business, be careful who you’re taking a loan from. This type of business loan isn’t regulated by the government.
3. Hire purchase
Do you need a medium-term loan to purchase an asset? Then hire purchase is the ideal choice for you. This loan comes with a 1-7 years term loan, which gives you enough time to ease the repayment. On the other hand, until the end of the term, a purchased asset is owned by the lender.
What is it used for? This type of loan is used for buying machinery, equipment and similar assets for your business. Even though they come with flexible repayment methods, you don’t own the assets until the end of the repayment term. Also, you will need to pay the deposit for your loan.
4. Equipment financing
Similar to hire purchase, equipment financing is also used to purchase equipment and machinery for your business. In addition to that, the lender also owns your purchased equipment until the end of the term contract. It’s a fixed-term type of loan which means the interest rates stay the same throughout the entire loan term, providing additional security for your plans.
Unlike hire purchase, an equipment financing loan doesn’t require the deposit, or the deposit is really small so it minimises the impact on your working capital. Additionally, it allows flexible repayment option which suit your cash flow. At the end of the day, it’s up to you to decide whether it’s better to buy or lease equipment for your business.
5. Custom Short-term business loans
Do you need a reliable loan you can repay in less than 12 months? Opt for a short-term business loan for your small business. Many small businesses choose this type of loan to maintain cash flow or liquidity. If you need urgent cash to pay the bills or unexpected costs, same-day short-term business loans are ideal for you.
Even though many types of small business loans exist, you need to find the best to suit your business’s needs. So, opt for the best flexible Sparrow Loans for your business, as you can completely customise it to your needs. Pay only what you need and enjoy your customised loan.
6. Traditional bank term loan
When the word loan comes up, most people think about traditional bank loans, so it’s only fair to put them on the list. Traditional bank loans are usually longer fixed-term loans that require a lot of paperwork and complex procedures to be accepted.
However, they do have some benefits, such as the choice between fixed or variable rates. If you’re still having second thoughts about business loans, think about all the things a loan can do for your business.
Conclusion
As you can see, these are only some of the most popular small business loans you can take. If you want to improve your business or make a larger purchase, getting a loan is usually the best and safest option for any kind of business. So, choose the type of loan that suits you the most and continue running your business like a true star!
