If you are a small business struggling to get off the ground, a bank loan can be your best choice. Understanding the different types of loans, the benefits of this financial option, and which companies to use can help you take the guesswork out of beginning your startup.
Types of Business Loans
Numerous types of business loans can work for your unique needs. Understanding how they differ and which type is best for your business's size, financing, and timeline is key to choosing the right option.
- Friends and family loan (crowdfunding) — Asking friends or family for money.
- Benefits — Low interest rates, flexible repayment, reliable.
- Drawbacks — Can harm personal relationships and blur lines.
- Line of credit — Use funds up to the preset credit limit.
- Benefits — Flexibility gives owners access to the funds whenever needed.
- Drawbacks — Excess spending.
- Credit cards — like a line of credit.
- Benefits: Easy approval process and flexibility in how to use the funds.
- Drawbacks: high interest rates and outstanding balances.
- Square small business loan — Used for credit and debit card sales.
- Benefits – Fast approval process, quick transfers
- Drawbacks — The loan repayment timeline varies based on current sales.
- Overdraft — This lets businesses go into a negative balance in their account.
- Benefits — Provides safety in case of unforeseen extra purchase and spending.
- Drawbacks — High-interest fees on overdrawn amounts.
- Working capital loans — Short-term loans for expenses.
- Benefits — Lower interest rates, works well for short-term purchases (ex: inventory, payroll, everyday payments, marketing, etc.)
- Drawbacks — Long approval process
- Business term loans — Borrow a sum and pay it back per month with a fixed interest rate.
- Benefits — Large amount of money, clear loan repayments per month
- Drawbacks — High interest rate, possible collateral
- Unsecured business loans — similar to business loans, but no collateral required.
- Benefits — Fast application process
- Drawbacks — High interest rates
- Revenue-based financing — Smart for startups, where investors give capital and expect future revenue in return.
- Benefits — Works well for large sums of money
- Drawbacks — Time and effort to pitch the idea of the business to potential investors
Benefits of Business Loans
If you are debating whether or not you should use a business loan bank option to help your company succeed, there are many benefits to obtaining this type of funding. It can help you get short-term capital for a one-off purchase. But, it can lead to long-term perks, like finished payroll, investments in new products, and a better credit score.
Borrow Lots of Money
One of the main perks of selecting a business loan for your company is that you can secure money for your needs — and we mean, a LOT of money. Some business loan bank choices can fund small or medium-sized businesses upwards of $3 million for necessary purchases to obtain products or services.
This is helpful for companies that require a hefty investment, such as new technological innovations, a huge business project, or upgrades to enhance their offerings.
Control of Your Money
The second benefit of a business loan for your company is that you can fully control the money you borrow without selling a percentage of your ownership or being controlled by the lender.
Once you have a business loan, you can use the money in whichever way you see fit. You don’t have to work together, or for anyone, when it comes to how or where you direct the funds.
Plus, lenders are not the ones in charge of the money allocation — you are. They can ask how you intend to run your business or your company's overarching goals, but they can’t tell you what to do with the given funds.
Accessible Funds
The third perk of using a business loan to enhance your business is that you can easily access your funds immediately. Some business loan bank institutions give you the funding within one business day after your application, meaning you can make that time-sensitive purchase within 24 hours.
Instead of waiting for the funds to be released or making enough money to invest in a specific technology, you can obtain the necessary funds ASAP from lenders. This gives you immediate capital and makes you more desirable to investors who could potentially put even more money into your company.
Tax Deduction
Obtaining a business loan doesn’t necessarily mean you have high interest rates and tax fees to pay back at the end of the year. In fact, you can enjoy a tax-deductible loan that can be claimed in your personal income tax filing.
Increase Your Capital
One of the main reasons businesses opt for a small business loan toward the beginning of their company’s inception is to get capital quickly. Without money to do anything, businesses are at a standstill — they can’t invest in products or services to get customers, and the customers can’t pay them for their offerings. Therefore, there is no cash flow.
With capital, businesses can maintain their operational cash flow and pay back any expenses without dipping into their savings.
No Collateral Required
Another reason small business owners and startups may obtain a business loan is to avoid putting down any collateral to get the funds. Money lending companies provide ample loan amounts based on the company’s cash flow, income levels, credit statements, or credit card reports, disregarding the need for collateral like guarantees, properties, vehicles, or properties.
Keep your Profits
Finally, companies that apply for a small business loan can reap the benefits of their business profits without sharing them with anyone else. Even if your profit is much bigger than anticipated, you still pay the pre-agreed-upon amount back to your lender.
Best Business Loan Bank Options for 2024
Are you interested in securing a small-business loan for your up-and-coming company, but you don’t know who to trust? There are certain financial institutions that are best for helping small businesses, startups,and entrepreneurs succeed – without going bankrupt before you even begin.
We know it can be difficult to secure capital and get the proper funding for the necessary inventory, payroll, and investments if your business hasn’t really ‘taken off’ yet. That is why securing a business loan with a local bank or online source is the best choice to get off the ground.
We have researched to determine the best banks for small business loans, what they stand out from the pack, and what it takes for you and your company to qualify for these specific loans.
National Funding
National Funding is a great choice for an early payoff discount, featuring loan amounts upwards of $500k with terms lasting as long as 18 months for repaying your debt.
The perks of choosing National Funding are that you can choose high loan amounts, receive offers for paying off your debt early before the refinancing period is completed, and provide funding specialists who can help you with any questions or concerns you may have.
The main drawback of this funding choice is that the website provides limited information for problem-solving. Plus, there is no monthly payment option to organize your finances.
Additional things to note before applying for this small business loan are that you must have a personal credit score of >660 and a minimum business revenue of more than $250k before applying.
PNC Bank
PNC Bank offers great loans with fast approvals upwards of $3 million, making it one of the most far-reaching bank loan options for small businesses and entrepreneurs. Companies can choose to pay off their loan between 24 and 60 months, making this a smart choice for companies that need a lot of capital, quickly.
The perk of choosing PNC Bank is that companies can obtain high loan limits with very low interest rates. The drawbacks of using this small business loan are that no online application is available and the website gives very limited information for potential customers.
Applicants must keep in mind that they need a minimum credit score of 660 and two years in business.
TD Bank
Are you located on the East Coast? If so, TD Bank offers one of the best business loan bank options for you and your small startup company, featuring loan amounts upwards of $ 5.5 million to pay back in 300 months.
You can even start your online application for a loan up to $250k if you are in desperate need of money ASAP. The only drawback to TD Bank is that it is only available in 15 states and includes origination fees.
Bank of America
Another smart choice for a new business that needs to secure fast capital and build a higher credit score is Bank of America business loans. This reputable financial institution offers loan amounts starting at $25k and loan terms ranging from 6 to 18 months.
Startups can obtain various loan products at low interest rates, making it easy to secure funds, sometimes as quickly as within one day. The only drawbacks to using Bank of America loans are the limited options for those with poor credit and the slow application process.
Get Started Funding Your Entrepreneurial Adventure Today
Are you still trying to decide which business loan to get? Should you open a business line of credit or take a merchant cash advance?
We are here to help. Contact us today to get started figuring out which business loan bank choice is right for your unique company.
