A loan is a smart way to get an investment of money into your business to ensure its continued success and growth. New staff can be hired, expansions can be made, or systems can be updated. There are as many different reasons to get a loan as there are loans themselves. The thing is, where does the brave business owner go when it comes to acquiring these funds? It isn’t massively difficult to find someone willing to lend you at least some sum of money. However, the type of lender can make a serious difference in how palatable your loan repayment experience is.
Here’s where most loans out there end up getting secured:
This is the most apparent source of a loan – going to the people who have all of the money. A vast majority of loans for business are taken out at banks and credit unions because they have the funds and the infrastructure available to make them happen. A loan from a bank will require paperwork, a good credit score, and often a moderately long waiting time before the paperwork is all approved and the funds get deposited in your account. At the same time, a loan from a bank does wonders for increasing your credit. They often have the lowest interest rates, and your payments will be simple to make.
Not everyone wants to deal with banks, and instead choose private lenders for a multitude of reasons. They often don’t offer the best interest rates in the business and also tend away from loans that have a long repayment period. What makes them attractive is that they often accept people with low credit and have a speedy approval process, perfect for those looking for an easy term loan. When money is needed quickly and the interest rate isn’t that much of a concern to you, a private lender can often be a much better option than the bank.
While the government won’t necessarily give you a loan directly, often, governments will work with banks to give special loans in which the government absorbs some of the risks. Typically, these loans are for smaller businesses that make $10 million or less a year. The goal is to make loans more accessible to those who want to deal with a bank, but don’t have the kind of relationship with their bank necessary for their needs. These types of loans aren’t often advertised so you’ll have to ask specifically for any government programs your bank can help you with. Often, these loans are incredibly favorable toward whoever is being lent the money since the bank puts much of the risk on the government, as opposed to absorbing it themselves.
Money doesn’t grow on trees, yet some institutions have more than they know what to do with. The rise of private lenders dedicated to specific forms of loans is slowly contributing to them becoming on a par with banks, as far as interest rates and total amounts possible to be loaned are concerned. Doing your homework on an established private lender might end up being more worthwhile than going to your bank. Still, a bank will always be the quintessential creditor. Check all of the terms available from these lenders before settling. One lender might have exactly what you need compared to the others.