Personal loans, car loans, home loans are types of loans any individual can apply to finance different purchases and cover many expenses. But what about business owners? Can they apply for these as well to finance their business needs?
Well, there are loans designed to satisfy the financial needs of a business, which have special terms and benefits that may not be similar to the terms of the loans mentioned above, considering the different nature of the financial requirements a business may have.
Here are some of the most common business loans that banks and private lenders offer:
Short-term Loans
With short-term loans, the chances of getting approved are always high. Once the loan is approved, business owners will have access to the money within a short term, sometimes within only 24 hours of approval. The repayment period ranges from 1 to 3 years, and the interest rate is normally very encouraging, depending on the plan the lender has to offer.
Short-term loans are a good option for businesses to deal with unexpected situations and emergencies. It can serve as a means to finance many business needs, the replacement of an expensive part of broken equipment, seize the opportunity of a business expansion, hire new staff due to sudden business growth.
The requirements for these types of loans aren’t complicated. Having a good credit score and history will seal the deal. Business owners may be required to offer collateral, e.g., a commercial property.
Equipment Loans
Equipment financing is meant to fund small business owners and enable them to buy the equipment needed to run their businesses.
There are no limits on what the business owner can purchase using an equipment loan. It can be used to buy office furniture, computers, medical equipment, and any other machinery needed for the business.
Equipment loans are asset-based loans. All equipment purchased using the loan serves as collateral that the lending bank can seize if business owners fail to repay the loan.
As an asset-based loan, equipment loans have less restricted requirements when it comes to the credit score since the loan is secured with collateral. The credit score and business age can play a role in determining the interest rate, but usually, equipment loans offer affordable rates.
Commercial Real Estate Loans
Businesses need commercial spaces to function in, a retail space, an office, a storage space. It all depends on the type of business. It’s similar to a home loan, but it’s used for commercial properties rather than residential ones.
To finance the purchase of a commercial property, business owners can apply for a commercial real estate loan, where the purchased property is offered as collateral.
The commercial real estate loan can also be used to finance the construction of commercial spaces or the extension of an already existing one.
Commercial Vehicles Loans
If a business needs trucks, cars, or any other vehicles but has no funds to purchase them, business owners can apply for a commercial vehicles loan.
Commercial vehicles loans are secured loans; the purchased vehicles are collaterals to guarantee the bank will get the value of the loan in case the business couldn’t afford to pay back the loan.
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