What Type Of Small Business Loan Do You Need?

If you own a small business, there is bound to be a time when a bit of extra money would come in handy. A number of different loans are available to suit your needs. You can choose to go to your bank or choose one of the alternative routes depending on what you want or need the money for. Write down the plans you have for added funds and then decide which type of loan you should get.

Line of Credit

If you are looking for a way to pay your bills while waiting for your clients to pay you or need an infusion of cash for a short time, ask your bank for a line of credit. With this type of loan, you are approved for a specified amount and you use it as you need it; you do not need to take the whole amount at once. This way, you only pay interest on the amount you actually used. With some lines of credit, you only have to pay the interest amount each month until the end of the loan term. You then pay the entire balance. However, you can then start to use the funds again after a waiting period, often one month.

Equipment Loans

If you are in need of extra cash to buy more equipment for the business, you may want to look into equipment loans. Often, the business selling you the equipment will allow you to buy it on terms. This may provide you with a lower interest rate than getting a traditional loan because the equipment company will use what you buy as collateral. In other words, if you don't make the payments, they will come take the equipment back. Banks and other lenders are not interested in having to repossess and then sell the equipment to get their money.

Merchant Advances

If your business accepts credit cards, you can have a merchant account with the credit card company. You may be able to request an advance from this company based on your previous credit card sales. This type of loan may be easier to obtain because the company will just keep a portion of each future sale to get their money back.

Sometimes all your business needs is a bit of money to push things from just breaking even to showing a profit. This could be the need to have more equipment or inventory or hire more help. Knowing what type of loan you need is the best way to make sure you get what you need without overextending yourself.

For more information, contact local professionals like American National Bank Of MN.