Small Business Loans

Tips on getting a small business loan

There are many different types of small business loans available to self-starters seeking to launch a new business or finance an existing one. Even if your business is suffering from cash flow or credit problems, you can get a government small business loan that can provide the capital injection you need to right the ship.

An Overview of Small Business Loans

One of the most common small business loans is known as the operating loan or working capital loan. These loans are generally sought by businesses with a high volume of accounts receivable, which puts a strain on the amount of cash available on a day-to-day basis. Retail businesses and restaurants rarely qualify for operating loans because they are almost exclusively cash businesses.

If you need to finance the acquisition of assets over the long term, term loans are something you should look into. These loans work a lot like mortgages or auto loans, in that they're paid down monthly over the term of the loan, with a certain percentage of each payment going towards principal and a certain percentage covering accrued interest.

Corporate expense cards and merchant accounts are also available through financial institutions. These specialty credit card products are designed with the business owner in mind, offering higher credit limits than consumer credit cards and offering rewards and bonuses for regular use.

Small business loans for women and minority small business loans are also available, typically through government channels, to encourage entrepreneurial diversity. These small business loans have many advantages, so apply if you qualify.

Understanding the SBA Loan

The SBA loan, or small business administration loan, is a government-sponsored program designed to help American small businesses that may not entirely meet a bank's lending criteria. To get a small business administration loan, you must apply through a bank as well as qualify for the SBA program.

There are four different SBA loans available:

  • SBA 7(a). This is the primary type of SBA loan, and you can borrow up to $1 million this way. The amortization maximum is six years, and the government will guarantee up to 75 percent of the loan value.
  • SBA MicroLoan. These small business loans are designed specifically for small upstarts. Interest rates are capped at prime plus 4 percent, and you can borrow up to $25,000 to finance the purchase of computers, equipment and materials.
  • SBA 504. Growing companies who need to purchase real estate qualify for the SBA 504 loan. Government guarantees for 504s are as high as 90 percent of the appraised value of the property to be purchased.
  • SBA Fastrak. These loans, available only through large, stable, nationwide banks, can be approved without the input of the government. You can borrow as much as $100,000, with the government backing up to half the loan value.
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