On this page, we’ll explore the most standard types of business or commercial loans that are available for businesses.

Term Loans

Term loans are the most common type of general-purpose loan, used for working capital, refinancing, acquisitions and expansion. They’re repaid monthly over a term based on the expected lifespan of the assets that you’re purchasing.

Short Term Loans

Short term loans are typically set up for duration terms of one year or less. T hey’re repaid in a lump sum at the termination of the loan (as opposed to in monthly installements). end of the term, instead of monthly. Usually for smaller amounts (less than $100,000), they’re well suited for small investments with rapid returns and building up seasonal inventory.

Equipment Financing

Relatively-speaking,eEquipment financing is typically easier to get than general lines of credit, primarily because the equipment you buy serves as actual collateral for the loan. From a borrower’s perspective, it’s also less risky, since if a borrower defaults, the business or personal real estate isn’t at risk, only the purchased equipment is.

Lines of Credit

These are often set up to insure against cash flow issues. Here, instead of receiving a check for the full amount of a loan, financial institutions allow borrowers to borrow a certain amount per year – and they can take the money out in increments as the need arises. These are designed for temporary cash shortfalls, not huge business improvements since if you don’t repay the loan balances relatively quickly, these types of loans can become quite pricey.

Credit Card Advances

This is a loan that’s based on your track record and your future business expectations. If your business has at least three years of accepting credit cards history (which is a strong indicator of your future earnings), this is a good choice.

Factoring

Also known as Receivables Financing. Basically, a borrower is selling his / her invoices to a third party – and instead of waiting for customers to pay off those invoices, a borrower gets the majority of the funds immediately – minus a small financing fee (usually 3% to 5%) that’s due to the factoring i.e. third-party company. Usually, you’ll receive 80% of the invoices’ value upfront and the remaining 20% once the client pays.

Your business might be a good candidate for factoring if you have:

* Fewer than three years in business
* Good growth prospects but less than stellar cash flow
* Active accounts but slow paying customers