Businesses are always in constant need of smooth cash flow. If you own a business, you know how important it is to have sufficient funds. This is why a number of loan types are available. Any kind of financial emergency may appear. If you know about the available options, there will be no last-minute hassle.
The most dependable 8 types of business loans
Yes, the most popular 8 types of business loans can solve all your cash flow concerns. These are also known for business loan with fast approval. It means you do not need to worry much about the chances of getting accepted. Usually, fast approval loans have a high approval rate if you fulfil the basic condition of affordability.
1. Working capital loans
These are short-term, specialised loans to cover daily business expenses. These loans aim to smooth your cash flow, nothing else. This is why, for urgent needs, you can rely on working capital loans.
The loans can be used for –
- Cover rent and utility bills
- Pay off salaries
- Manage short-term cash shortages
- Purchase inventory
You can fulfil short-term to mid-term financial requirements using the loans. The businesses with irregular or seasonal income specifically prefer the loans. For a temporary cash flow issue, the borrowing option is always safe.
2. Business lines of credit
It is much like a credit card, but not as expensive as that. With a lower rate of interest and higher borrowing limits, a line of credit is always a practical option.
Why are lines of credit a good choice?
- Funds can be reused after you repay
- Pay interest only on the amount you use
- Ideal for unexpected expenses
The flexibility of this credit option helps to manage fluctuations in cash flow. If your business faces delayed client payments or unpredictable expenses, choose a credit line.
3. Short-term business loans
As you can read and understand, these are the loans for 1 to 5 years. From small daily expenses to other needs, such as buying inventory, use funds for any purpose.
Why is it a practical choice?
- Handle emergency repairs
- Cover payroll gaps
- Pay suppliers on time
The rate of interest for these loans is higher as compared to long-term loans. But due to speedy online process and easier approval, you can always choose them.
4. Invoice financing
If your business issues invoices, invoice financing is a promising funding option. The financing companies lend you funds equivalent to a considerable percentage of the pending invoice amount.
Benefits of the financing option are –
- Immediate access to cash
- Funding grows with the growth in sales
- No need to wait for customers to pay
This type of business loan is perfect for B2B commercial entities, service providers, and contractors.
5. Merchant cash advances
A merchant cash advance provides an approximate cash advance as compared to a future card sale. You can say this funding works on the business sale forecast. Repayments are deducted from weekly and daily transactions.
Businesses choose it for –
- Fast approval and funding
- Payments adjust as per sales volume
- No fixed monthly repayments
MCAs work in the best possible way for businesses in the hospitality and service sector with steady card transactions. However, they are more expensive and used for short-term needs.
6. Government-backed loans
Government-backed loans and schemes are mainly for small and medium-sized enterprises. They are affordable and have favourable terms.
The benefits include –
- Longer repayment periods
- Lower rate of interest
- More manageable monthly payments
The loans may have a slow process, but they are good for improving cash flow. You can use them to refinance expensive debts.
7. Equipment financing
As the term denotes, the financing option is used to finance equipment purchase. You get a large amount, and the repayments are affordable.
Cash flow advantage –
- Preserves working capital
- Equipment acts as collateral
- Affordable and small instalments
- 8. Supplier financing and trade credit
This allows businesses to purchase stock from suppliers and pay them later. The payment often happens within 30 to 90 days. While not a traditional loan, supplier financing plays a vital role in cash flow management.
How the loan helps –
- Improves short-term liquidity
- Builds stronger supplier relationships
- Keeps cash in the business for a long time
This type of financing option is the best if you have a retail or wholesale business. This allows you to wait for repayment until your stock starts selling.
How to choose the loan that is right for your business cash flow?
You need to follow several tips to choose the right business for a smooth cash flow.
Ask the following questions while searching for the loans –
- Do you need funds quickly?
- How quickly is the need?
- How long will the financial gap be?
- Total cost of borrowing
With all the options above and these tips, you can choose the best option. Find the right lender and the loan type, and your business will never be out of cash.
Conclusion
The loan types above serve to varied financial circumstances of a business. You can consider many or any of these to manage your daily operations well. Well, it is also important to select the right lender. For fast funding, direct lending is always the better option.
Figuralloans is an established online lender providing the best personalized deals on business loans. You should try for your chance, apply today, and get a loan to stabilise your business finances.