Different types of Business Loans in USA

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Different types of Business Loans in USA
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Bank Term Loans

• Banks issue bank terms loans for a specific
  amount, and have long-term repayment plans.
• These loans have both fixed and floating interest
  rate.
• A term loan is appropriate for small business
  owners with sound financial statement, and the
  ability to repay over a specified repayment
  schedule.
• Terms loans are usually used to purchase
  equipment and fulfill working capital needs.  

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Types of term loans

• Reflecting the lifespan of a loan, term loans
  have several varieties
• Short-term loan Offered for a short period -
  less than a year, and is paid in weekly or
  monthly installments, through a loan that runs up
  to 18 months can be referred as a short-term
  loan.
• Intermediate-term loan The loan runs typically
  between one to three years and paid in monthly
  installments.
• Long-term loans Long-term loans last for three
  to 25 years, but may last for 30 years in some
  cases. The long term loan requires monthly or
  quarterly payments from the companys profits.

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Bank Line of Credit

• A line of credit is an unsecured loan that a
  customer can borrow from a financial institution
  usually a bank - and use for any purpose, as
  needed.
• Customer will need a good credit score, typically
  credit score of 680 or higher, and have a decent
  history of repaying debts promptly.
• Line of Credit (LOC) may be cheaper than a credit
  card advance and more flexible than a personal
  loan.
• LOC can be the best help when you need money
  incrementally.
• It can be used for home renovation projects, for
  a great vacation, medical bills, big-ticket
  purchase, childs fees.

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How does LOC work?

• You can access funds from the line of credit,
  whenever you need.
• In the line of credit, unlike a loan, you dont
  have to get a lump sum amount upfront.
• You have variable access to a line of credit as
  long as you dont exceed credit limit or maximum
  amount as you need it.
• Accessible through electronic transfer and checks.

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Equipment Loans

• Issued to purchase business equipment.
• The best financing option to help small
  businesses get the capital to acquire, replace,
  repair, and upgrade various types of machinery to
  produce, manufacture process their products.
• Used to buy
• medical and dental machinery for hospitals
• cookware, oven, table and chair, and other
  catering supplies for restaurants
• monitor, printer, scanner for offices
• specialized machinery, furniture, a vehicle for
  transportation, etc. for efficient and productive
  operations.
• One can pay 100 of the cost of the equipment
  used for his/her business.
• Depends on the total value of the equipment you
  are purchasing.

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Invoice Financing

• Invoice financing allows you to borrow money
  against unpaid invoices i.e., against the amount
  due from customers.
• Lenders provide companies with cash
  collateralized by accounts receivable.
• Can get up to 85 of the value of your invoice.
• A great way to invest capital into your business
  when customers are taking a long time to pay the
  bills.
• Helps to improve cash flow, paying employees and
  suppliers, and covering other expenses.
• There is less risk involved in invoice financing
  from a lenders perspective.
• Unlike a line of credit which may be unsecured,
  invoices act as collateral for invoice financing.
  
• Although it doesnt eliminate all risk, customer
  may not pay the bill. 

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Purchase Order Financing

• Financial assistance for businesses that lack the
  cash flow to complete customer orders.
• Many small businesses have cash flow problem to
  complete a purchase order, and thats why it is
  needed the most.
• Pays the supplier of your company to deliver
  goods to the customers.
• When the customers pay purchase order financing
  company then makes money by charging your company
  various fees.
• Deducts its fees from collected invoice and
  returns the remaining amount to you.
• If you have a new business and get large orders
  at once, you might not have money to deliver
  these orders to your customers.
• Makes sure you have enough fund to fulfill the
  orders.    

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Rollover for Business Start-ups

• A rollover for business startups allows you to
  use funds from your retirement account to invest
  in your business.
• With rollover for a business startup (ROBS), you
  dont pay early withdrawal penalty or taxes.
• A ROBS is neither a business loan nor a 401(k)
  loan, so there is no debt or interest to repay.

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How rollover for business works?

• ROBS gives you access to your retirement funds to
  use it to fund
• a new business
• buy an existing business
• recapitalize your business without having to
  borrow or cash it.
• A ROBS is not a withdrawal from or a loan against
  your retirement fund.
• When you use it, your retirement account buys a
  share of your business.

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Hard Money Loans

• A hard money loan is a specific type of
  asset-based loan option for real estate investors
  when they cant get a loan from a traditional
  mortgage lender.
• A hard asset and collateral secure a hard money
  loan.
• Many new businesses are turning to hard money
  loan because they are easier to achieve than
  traditional loans.
• Expensive and hard to pay.

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How hard money loans work?

• Issued for a short term typically 6 to 24
  months.
• You can close it as soon as you can.
• Allows real estate developer and investor to
  purchase new properties and do more transactions
  with less money, which will get them a higher
  return.   

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Non-Profit Business Loan

• These lenders cater to small business in their
  community that can potentially impact the economy
  by creating jobs.
• Non-profit lenders often offer to business owners
  unable to access capital from traditional lenders
  for nominal interest rates.
• Their objective is to support the economic
  development of the community.
• Non-profit lenders develop a strong relationship
  with small business owners they lend to.
• They help borrowers navigate particular
  challenges and provide them fund before it is too
  late.

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Advantage of Short-term Loans

• Shorter time for incurring interest
• Quick funding time
• Easier to acquire

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Merchant Cash Advance

• A merchant cash advance is a cash advance but
  operates like a loan.
• It is a lump sum payment that a finance company
  provides you in exchange for a percentage of your
  credit card and/or debit card sales.
• Merchant cash advances (MCA) are approved quickly
  and easily with no collateral, even if you dont
  have a good credit score.
• Have higher fees than traditional loans.
• Merchant advance companies are not bound by usury
  law and operate in mostly unregulated market.
• MCA can help with inventory purchase, debt
  payments, working capital, and other unexpected
  payment. 

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Online Business Lines of Credit

• A business line of credit is like a small
  business credit card.
• It gives you access to a credit limit when you
  need capital.
• Unlike a traditional business loan, you have
  variable access to a business line of credit as
  long as you dont access the limit.
• You can access the fund as per your need and
  repay the only amount you get, plus the interest
  rate.
• You can draw on a business line of credit to
  tackle cash flow gap, get more working capital,
  and other unexpected payment.     
• With a business line of credit, you can typically
  borrow from 10,00 to over 1 million in funding.
  
• Repayment term generally ranges between 6 months
  to 5 years, depending on your credit worthiness,
  for 7 to 25 interest rate.

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Benefits of a Business Line of Credit (BLOC)

• Poor credit is acceptable
• Only pay interest on fund accessed
• Suitable for a wide range of business purposes

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