Business loans are essential for entrepreneurs, start-ups, and established businesses seeking growth or navigating short-term financial challenges. These flexible financing options are available from banks, credit unions, and online lenders, each offering different interest rates, repayment terms, and eligibility requirements. The best small business loans are often highlighted for low interest rates, long repayment terms, and additional features that cater to different business needs. This article is focused on our lending partners at National Business Capital , but whomever you choose as a lender, do you home work and be prepared, so your chances of success are greater.
As a new or existing business owner, finding the right source of capital for your business can be overwhelming. Whether you’re looking to grow, purchase new equipment, or manage your cash flow, having access to the right financing options is key. This guide will help you navigate the different types of business loans and why National Business Capital may be the right choice for you.
Small business loans can be utilized for new equipment or inventory, expanding operations, hiring additional staff, or consolidating debt. Whether you’re a small business owner aiming for growth or a large corporation seeking financial stability, business loans can help you achieve your goals.
Why Choose National Business Capital When Looking For Best Business Loan Options
National Business Capital is dedicated to building strong relationships with their clients. With over 75 lending partners in their network, they can get approvals that many others can’t. Their broad reach means clients get financing that fits their needs and budget. National Business Capital can help clients understand and manage the requirement of a personal guarantee for loans. Since 2007, National Business Capital has secured over $2 billion for their clients, they are reliable and proven in the industry.
- Large Lending Network: Over 75 partners.
- High Approval Rates: Get approvals others can’t.
- Huge Funding Secured: Over $2 billion since 2007.
- Client Focused: Building strong relationships.
Small Business Loan Statistics
According to the Federal Reserve’s latest report, the average small business loan is approximately $663,000. Despite the availability of funds, the percentage of businesses seeking traditional financing has declined in recent years.
Minimum credit score requirements can greatly impact a small business’s ability to get traditional financing. A bad credit score can limit traditional loan options, resulting to higher interest rates and more scrutiny on business plans and revenue.
In 2019, 43% of small businesses applied for a loan, which decreased to 37% in 2020. By 2021, only 34% of small businesses applied for a loan. The reason for the decline in traditional financing is unknown, but it appears that small businesses are opting for alternative financing options such as crowdfunding, peer-to-peer lending, and fintech platforms.
While traditional financing has become less popular among businesses seeking funds, the process has also become more challenging. In 2021, only 31% of applicants received all the funds they applied for, compared to 51% in 2019. Overall, the percentage of applicants receiving the full amount of funding they applied for has decreased.
The good news is that outstanding debt for small businesses decreased from 80% in 2020 to 74% in 2021, with most businesses having $100,000 or less in debt. Despite the challenges, businesses are finding ways to finance and manage their debt effectively.
Why Apply For A Business Loan
A Forbes survey asked business owners how they used funds from their latest business loan. Respondents could choose up to three.
According to the survey, a significant portion of business owners used the funds for business expansion, with 42.4% selecting this as one of their top three choices. Equipment purchases were the second most popular, chosen by 29.4% of respondents, while marketing and advertising accounted for 28.6% of the loan usage.
Bad credit business loans are available for businesses with bad credit scores but may have higher interest rates and stricter terms.
Business franchising was another reason for financing, 27.6% of respondents chose this, followed by commercial real estate purchases/remodeling 26.8% and business acquisitions 25.4%. Other reasons were:
- Inventory purchases (24.2%)
- Cash flow for everyday operations (22.4%)
- Payroll expenses (21.8%)
- Debt consolidation/refinancing (18.6%)
These results show the priorities of business owners as they look to grow and develop their businesses. Also useful for lenders and investors to understand their market.
Business Financing
- Debt Financing: Loans that need to be repaid with interest.
- Equity Financing: Investors provide capital in exchange for ownership equity.
- Non-Debt Financing: Grants or gifts that don’t need to be repaid.
Most Popular Financing Options
Business Loans
Business loans provide funding for entrepreneurs to address challenges, take advantage of opportunities and invest in their business. These loans can be used for various purposes such as working capital, equipment, expansion, payroll and other investments.
Small business financing comes from traditional banks, online lenders, and credit unions.
Business Lines of Credit
A small business line of credit provides flexible access to cash on an as-needed basis. This financing option allows you to draw cash from your total credit limit for any business purpose, pay interest only on the amount you use.
- Flexible Funding: Draw cash as needed.
- Interest on Used Amount: Pay interest only on the drawn amount.
- Multi-Purpose: Suitable for various business needs.
Equipment Financing
Equipment financing helps businesses grow by purchasing necessary equipment. This type of financing is available for any type of equipment, medical, software, manufacturing, commerce, food services, automotive and more.
Some Of The Industries Served by Equipment Financing:
- Medical
- Software
- Manufacturing
- Commerce
- Food Services
- Automotive
SBA Loans
SBA loans are backed by the Small Business Administration and provide working capital for various business needs such as expansion, equipment purchase, real estate acquisition, and refinancing existing debt. SBA loans are popular because of lower interest rates and longer repayment terms making it a good option for small business owners.
There are different types of SBA loans, 7(a) loans, 504 loans, and microloans each with its own benefits suited for specific business needs.
SBA Loans Benefits
- Lower Interest Rates: Cheaper borrowing costs.
- Longer Repayment Terms: Easier cash flow management.
- Multi-Purpose: Suitable for various business needs.
Revenue-Based Financing
Revenue-based financing allows businesses to get capital fast by using future sales. This flexible financing option is for short-term cash needs without the hassle of traditional loan applications.
Revenue-Based Financing Benefits
- Fast Capital Access: Funding based on future sales.
- Flexible Repayment: Repayment aligns with revenue performance.
- Less Application Hassle: Streamlined approval process.
Subordinated Debt
Subordinated debt is second-tier debt where the lender has a second lien position, the senior lender gets paid first. This type of financing is used together with senior debt to get additional capital for growth or transactions.
Specialty Financing Options
Accounts Receivable Financing
Accounts receivable financing uses receivables as collateral to get capital. This can include invoice factoring where receivables are sold for immediate cash flow. This financing method is fast and easy, the responsibility of payment collection is transferred to the factoring company.
Accounts Receivable Financing Benefits
- Fast Cash Access: Cash from receivables.
- Simplified Collection: Factoring company handles payments.
- Steady Cash Flow: Cash from sold invoices.
Asset-Based Lending
Asset-based lending uses the borrower’s assets as collateral to get loans or lines of credit. This type of financing provides businesses with the flexibility to get capital based on their asset values.
Asset-Based Lending Benefits
- Collateral-Based: Secured by business assets.
- Flexible Funding: Loans or lines of credit.
- Capital Access: Based on asset value.
Cannabis Business Loans
Cannabis business loans provide funding solutions for cannabis entrepreneurs. This financing option is designed for the cannabis industry, with no equity required.
Franchise Financing
Franchise financing helps franchise owners get funding for expansion, new locations, or other revenue-generating activities. So franchise owners can grow their businesses without waiting for a long approval process.
Purchase Order Financing
Purchase order financing allows businesses to buy inventory to fulfill customer orders. This funding solution ensures orders are completed and customers are satisfied even when working capital is low.
More Financing Options
Merchant Cash Advances
Merchant cash advances give businesses a lump sum upfront to be repaid based on future credit card sales or through fixed daily or weekly transfers. This is for businesses that need cash fast without traditional loan requirements.
Merchant Cash Advances Benefits
- Fast Funding: Cash upfront.
- Repayment Through Sales: Payback with future sales.
- Less Documentation: Easier application process.
Invoice Financing
Invoice financing allows businesses to get capital by selling unpaid invoices. This provides immediate cash flow and less waiting for customer payments.
Commercial Real Estate Loans
Commercial real estate loans for purchasing or refinancing commercial properties. For businesses that need to expand their physical presence.
Working Capital Loans
Working capital loans give businesses the funds to run daily operations. This type of loan ensures businesses have the cash flow to cover expenses and keep operations running.
Bridge Loans
Bridge loans for short-term funding to cover immediate needs while waiting for long-term funding solutions. For businesses in transition or waiting for bigger financing.
Why Choose the Right Financing
Choosing the right financing can make or break your business. It gives you the capital to invest in opportunities, manage cash flow, and achieve long-term goals. Knowing the different financing options and choosing the one that fits your needs is key to long-term business success.
How to Apply for a Business Loan
Applying for a business loan involves several steps, preparing financial statements, creating a business plan, and understanding the lender’s requirements. Research and choose a lender that fits your business needs and offers better terms.
Important Steps While Applying for a Business Loan
- Prepare Financial Statements: Get income statements, balance sheets, and cash flow statements.
- Create a Business Plan: Outline your business goals, strategies, and financial projections.
- Understand Lender Requirements: Research the lender’s requirements and documentation needed.
- Choose the Right Lender: Pick a lender that offers better terms and fits your business needs.
- Hire a business broker to help you identify and negotiate a suitable price.
Business Credit Scores
Business credit scores matter in getting financing. Having a good credit score can increase your chances of approval and better loan terms. Monitor and manage your business credit score regularly.
Also, personal credit affects the ability to qualify for different types of business loans. Having good personal credit is important as it can affect the minimum credit score requirement, risk to personal assets, and challenges for business owners with bad or limited credit.
How to Maintain a Good Business Credit Score
- Pay Bills on Time: Pay all bills and invoices on time.
- Check Credit Reports: Monitor credit reports for errors.
- Keep Low Credit Utilization: Keep credit utilization low.
- Build Credit History: Establish and maintain good credit history.
Cash Flow Management with Business Financing
Cash flow management is key to business success. Using business financing options like lines of credit and working capital loans can keep operations running smoothly and avoid cash flow interruptions.
Financial Planning
Financial planning is important for business growth and longevity. It means setting financial goals, creating budgets, and planning for future investments. Proper financial planning will ensure businesses are ready for opportunities and challenges.
Financial Planning Benefits
- Goal Setting: Set financial goals.
- Budgeting: Create budgets to manage expenses.
- Future Planning: Plan for future investments and growth.
- Preparedness: Be prepared for financial opportunities and challenges.
Small Business Grants
Grants are non-repayable funds given by governments, non-profits and other organizations. Exploring grant opportunities can give you additional funding without the need to repay, help you achieve your goals.
Business Credit Cards
Business credit cards is a flexible financing option to manage expenses and build credit. It’s a convenient way to cover short term expenses and offers rewards and benefits for businesses.
Grow Your Business with Term Loans
Term loans gives you a lump sum of capital for specific business purposes like expansion or big purchases. These loans have fixed repayment schedules making it suitable for long term investments.
Short Term Business Loans
Short term business loans gives you quick access to capital with shorter repayment terms. It’s for immediate needs and can be a bridge to longer term financing solutions.
Business Development Centers
Small Business Development Centers (SBDCs) offers resources and support for business growth. Utilize these centers for valuable insights, mentorship and financing assistance.
Traditional Business Loans
Traditional business loans are from banks and financial institutions. Understand the application process, requirements and terms of these loans for successful financing.
Revenue Based Financing
Revenue based financing has a flexible repayment structure based on business revenue. This aligns with business performance so it’s a good option for growth without fixed monthly payments.
Business Bank Statements
Business bank statements is a record of financial transactions and is required for loan applications. Keep your bank statements accurate and organized to make financing smoother.
Assess Your Financing Needs
Assessing your business financing needs means evaluating your goals, cash flow and financial health. Know your needs so you can choose the right financing for your business.
Loan Application Preparation
Loan application preparation means gathering required documents, understanding lender requirements and presenting a solid business case. Preparation increases approval and better terms.
Alternative Financing
Alternative financing options like crowdfunding and peer-to-peer lending gives you additional source of capital. Explore these options for flexible and innovative financing solutions.
Business Lines of Credit
Business lines of credit gives you ongoing access to funds for various business needs. It’s flexible and can be used for working capital, emergencies and investment opportunities.
Debt and Repayment
Debt and repayment is key to financial health. Create a repayment plan and understand loan terms so businesses can manage debt well.
Financial Statements
Financial statements (balance sheet, income statement and cash flow statement) is required to assess business performance and financing.
Grow with Business Revenue
Growing with business revenue means reinvesting profits to the business. This is for expansion, innovation and long term success.
Choose the Right Financial Partner
Choose the right financial partner means selecting lenders and financial institutions that fit your business goals and values. A good partnership gives you ongoing support and resources.
Conclusion
Finding the right capital for your small business is key to growth and success. National Business Capital has various financing options for business owners. Know your options and choose the right financing to achieve your business goals and long term success.
With the right financing solutions you can make a big difference in your business. Whether you need a small business loan, line of credit or specialized financing, know your options and choose the best for your needs. Utilize National Business Capital’s resources and expertise to get the funding you need to grow in your market’s competitive business scene.