Small Business Loans: Types And Eligibility Criteria

Initiating and managing a small business needs proper planning, coordination, talent, intelligence and primarily strong capital management skills. To start up and maintain a business, a budding entrepreneur needs adequate capital support for which he/she often resorts to small business loans. In order to promote small businesses many banking as well as non-banking companies have come up with various small business loan schemes to satisfy the diverse needs of their customers.

SBA Loans: The United States Small Business Administration (SBA) offers a variety of loan programs for small business owners.

Basic 7(a) Loan Guaranty program serves the start-up and existing small businesses and other commercial lending institutions. These loans are provided by participating lenders, which mostly comprises of American banks as well as some non-bankers who are associated with SBA 7(a) program.

The Certified Development Company (CDC) 504 Loan program is targeted for those small businesses that wish to acquire real estate/ machinery/ equipment for expansion and modernization purposes. These small business loans are provided in a long-term, fixed-rate financing basis by Certified development companies set up to facilitate the growth and development of their communities and regions.

Microloan, a 7(m) loan program supports the financial needs of small businesses and not-for-profit child-care centers. This loan program can be availed to fulfill the working capital needs and other needs like inventory, furniture, fixtures and other machinery/ equipments. Under this program the small business companies can get a short-term loan of up to $35,000.

Loan Prequalification program offers loans up to $250000 for which the loan applications are scrutinized and sanctioned by SBA themselves. Rather than depending on the applicant’s assets, the program primarily focuses on the overall character and reliability of an applicant.

Secured Loans: The amount of such loans directly depends on the value of the assets held by an applicant. In case of any failure in repayment, the applicant’s assets may be forfeited to the lender. Due to increased security of money lend under this scheme, the small business owners can avail of benefits like better rates and better repayment options. Apart from that a longer repayment period cuts down upon the monthly repayments helping the small business owners to manage their finances in a better way.

Unsecured Loans: These loans are without any security/ collateral and are focused entirely on the character and reliability of an applicant. However, the rate of interest in this case is considerably higher than the other options.

Bad Credit Loans: Small business owners with bad or poor credit history can go for Bad credit loans. Under this scheme the lenders may charge a higher rate of interest because of the increased risk associated with the money lend due to the applicant’s poor credit history.

Small business loans for Woman: Due to an increase in women leading small businesses, many banking and non-banking institutions are providing special loans that supports women financially to fulfill their business objective along with some additional benefits.

Small business owners can also go in for business cash advance, which is a better and easier method of finance support. Unlike loans, a business cash advance does not require a security or a collateral. The repayment solely depends on the future credit card sales of your product and the loan amount is repaid automatically through Visa/ Master cards sales. As the repayment is directly dependent on the revenue earned by the borrower through the credit cards sales, a business cash advance scheme is preferably a much better alternative than small business loans.
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