By: Jessica Bower
on Saturday, November 28, 2009
For many small businesses, financial assistance is not just helpful but necessary for success. Fortunately, small business loans and SBA loans are making it easier for businesses to obtain the funding they need. That being said, you may be wondering how to get a small business loan, or which type of loan is right for your situation. Keep reading to discover more about small business loan types, as well as the application process and small business loan rates.
Commercial Business Loans
Many types of small businesses qualify for a variety of commercial business loans. They usually include mortgage loans, which are used to help people buy properties, construction loans, which enable them to build properties and many other kinds of similar loans. Take a look at the following examples for a better understanding of what types of commercial business loans you may qualify for:
- Acquisition & Development Loans – Helps you acquire property and develop it
- Asset-based Loan – Collateral is required, but funding can be used for anything pertaining to your small business
- Bridge Loan – Temporary funding that is used while permanent financing is being secured
- Debt Consolidation Loans – Enables businesses to combine or consolidate loans into one with lower monthly payments
- Development Loans – Typically used for the purpose of building a new structure or improving an existing one
- Mezzanine Loans – These loans are secured by company stock rather than property and are somewhat similar to a second mortgage loan
- Construction Improvement/Rehab Loan – Money obtained from this type of commercial loan is used to purchase and renovate a fixer-upper business property
You should also know that the kind of loan you apply for is going be dependent on certain factors, such as the percentage of the purchase price you need to borrow, ownership of the property in which a building is going to be built on, and your profit outlook.
Government Small Business Loans
The United States Small Business Administration is a government-based program that helps start-up businesses succeed by offering financial assistance. However, there are certain requirements you need to satisfy in order to obtain an SBA loan. For assistance, according to SBA loan requirements, all businesses must be operated on US soil. Certain types of industries are automatically prohibited from receiving SBA funding. Questionable activities, such as gambling, pyramid schemes, lending or debt securitization and other such types of illegal actions are forbidden.
Furthermore, nonprofit and religious organizations do not qualify. The SBA also requires potential borrowers to already be personally invested in the businesses from a financial standpoint (usually one-fourth of the business owner’s equity). Depending on which loan you are going for, you will also find that the SBA imposes requirements for the proposed use of funds. For example, the SBA 7a loan can be used for different purposes, such as supplementing working capital or refinancing other debt. The SBA 504 loan however, must be specifically used for heavy asset purchases.
Small Business Loan for Women
If you are a woman planning to start your own business or wish to expand your existing business, a small business loan can be a great strategy to employ. In fact, many women are successfully managing their businesses with the help of these loans. There are certain SBA loans for women, unsecured small business loans for women who belong to specific minority categories, and different cash advance options to consider.
Small Business Loan Rates & SBA Loan Application Process
When it comes to small business and SBA loan rates, you have to understand that certain factors determine the interest rates. These can include your business’s credit score, whether you’re putting up collateral against the loan and the amount you are borrowing. The application process for a small business loan generally entails filling out a form with information about your business background, business plan, credit history and financial needs. When it comes to small business loans for women, some lenders may also require a proposal letter.
Whether you’re an entrepreneur that’s just starting out or a seasoned professional looking to grow your business, small business and SBA loan options can help you succeed!