Most enterprises rely on business loans to scale up their operations, purchase equipment, or consolidate high-interest debts. However, getting a loan is never easy, especially for firms that do not qualify for bank loans.

Most small enterprises have a hard time accessing adequate financing. As the business owner, you must find out the available options to keep your business programs running.

In this article, we will explore small business loans to consider. But let’s begin by looking at the importance of a business loan.

Importance of a Business Loan

Control

A business loan leaves you in control of your business decisions and operations. In some cases, your lender will not scrutinize how you use the funds. They will also not claim a stake in your business since your agreement requires you to repay the loan and all the fees and interest you agree on.

This is unlike when you get funding from investors. Some investors will ask for a percentage of shares in your business in exchange for funding. Some will also follow you to know how you use the funds and want to have a say in your business operations.

Customized Funding Options

Your lender may offer you different funding options aligned to your strategic plans. They may customize the loan for you and streamline the lending process to ensure you secure working capital quickly so that you can focus on reaching your business goals.

Fast Funding

Some business loans take about a day or two to process. If you are applying for an online loan, it may take a few minutes to complete the application and get the money wired to your account. Investor funding may stretch for about 12 months before the application, vetting, and releasing the money to you.

You can also access your lender easily since most of them have offices in most parts of the country. With their dedicated customer service experts, you will have someone to guide you through your application process in any of their offices. In addition, they require minimal documentation.

Transparency

When applying for a business loan, your lender will let you know the cost of your capital. This will help you plan your repayment schedule based on your projected business cash flow.

Excellent Customer Support

Business loan lenders go out of their way to forge a lasting business relationship that enables them to partner with you as you build your business. Besides lending you money, they will typically become valuable consultants that may offer you financial advice to grow your business.

Since they serve customers from different industries, they may customize solutions that give you a competitive edge.

While taking a business loan is an enticing idea, you should not decide without due considerations. Ensure you need the money and that you have a repayment plan. Here are some of the things to consider before taking a small business loan:

How Much Funding Do You Need

Ensure you know the exact amount you want to apply for before submitting your loan application form.  Consider the cost of equipment, transportation cost, or set-up costs to ensure the loan covers it all.

If you want to expand your business, consider the cost of additional stock, display space, and any transport cost you will incur to ship the merchandise. This will help you avoid taking a lower or higher amount than what your business requires.

Timing

Apply for the small business at the appropriate time. If you want to expand the business, the best time to take the loan would be at the peak season of your sales. If the loan is for buying new equipment, apply for it when you anticipate a good discount from the dealer.

Start the preparations early to factor in the time you need to apply, provide what your lender may ask for, and the loan to be processed in good time.

Your Credit Score

Get a copy of your credit report so that you can resolve any disputes on your credit score before applying for your small business loan.  Your credit score may determine the amount you qualify for and the interest rate your lender will charge you.

Shop for Alternatives

Traditionally, businesses rely on banks and credit unions to fund them. Today, you have alternatives such as merchant cash advance, as well as lenders with more flexible loan repayment plans. If you take your time, you may identify an alternative lender like Moby Cap with more business-friendly interest rates and repayment options.

Loan Terms

Read and understand the terms concerning processing fees, repayment period, and if there is a set payment date. Also, find out if there are penalties for early repayment and if the interest rate is on reducing balance. These terms will vary with lenders. Go with the lender with the best terms for you.

Simple Business Loans to Consider

Revenue Based Advance

This is the best loan for a business wanting to increase stock and sales but cannot access bank credit facilities. You agree with your lender on the percentage of your monthly revenue you will be using to pay off your balance.

That tells you there is no definite repayment period since the revenue and repayment installments will fluctuate from month to month. The loan is given based on revenue projection, and you do not require any collateral.

The lender does not need a company valuation to fund you. It also involves minimum paperwork, and the processing may take less than a month.

Pros

• The lender does not ask for collateral, equity, or processing fees. There are no hidden charges.
• Based on business cash flow
• Friendly to your business since you can modify the repayment structure if the cash flow fluctuates
• Fast loan processing with minimum paperwork
• Repayment schedule options including biweekly, weekly, or daily
• There is full disclosure. You will know the full amount you will repay, and there is no penalty for early repayment. This allows you to increase or decrease your installments depending on your sales volume

Term Loans

As the name suggests, term loans are designed to be paid back in fixed amounts over a predetermined amount of time. You will know your repayment period, stretching from 18 months to 5 years.

They are excellent for businesses wanting to increase their capital. Small businesses find these loans attractive since the installments are usually low and spread over a period.

You may choose a repayment plan based on your business projections. In some cases, you may choose to repay in fixed installments or increase the installments are your business grows.

Some lenders may give you a fixed interest rate on your term loan, meaning the interest rate will not fluctuate with the business environment. However, some may offer a floating interest rate that fluctuates with the business environment.

Pros

• They have long repayment periods and low installments
• You get fixed repayment installments, enabling you to plan your finances. You can choose a repayment plan that suits your business
• Fast processing

Invoice Factoring

This is a financing solution where you transact your account receivables like invoices with a financial institution.  If you work for an organization that delays before paying your invoices, you can the invoice factoring institution may pay you up to 90% of the value of the invoice, and you surrender the invoice to them.

Invoice factoring may shield you from delayed business operations like paying salaries and loans or getting merchandise for waiting customers. It may work well for you if you earn a high interest from the invoices to meet the invoice factoring costs.

In some cases, you may receive your invoice factoring cash the same day you present your invoice.  You can decide the amount of the value of the invoice you want the lender to advance you.

Once a lender has verified that your customers are creditworthy, they will release the money to you immediately. You will then wait for the invoice to be paid to receive your balance. Expect the lender to deduct their charges before releasing the money to you.

Pros

• You have uninterrupted cash flow even when your customers delay payments.
• You can get up to 90% of the value of the invoice to meet your financial obligation as you wait for payments from your customers.
• Invoice factoring shields you from bankruptcy.
• The creditworthiness of your customers is assessed.
• Fast processing
• Low interest rate with no hidden charges

To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experienced serving all industries and welcome the opportunity to work with your organization.

Get your funding from us in three simple steps where you apply securely, select a funding plan, and receive the funds in as little as one working day. We will assign you a dedicated agent to help you with your application process and to keep you updated about your account and our products.

Get in touch with us to speak to a funding expert and discuss your funding plan. You can get funding up to $5M.