5 Basic Loan Options For Business Starters

Finance

Starting a new business venture is both frightening and thrilling at the same time. The common problem that most business starters share has money to fund their business. While others may have already enough funds to start their business, there are those who have little to none but have a promising business idea and needs fund so they could start their business.

If you belong to this group and you are still wondering where to get additional funds for your business, below are the different type of loan you need to learn about before applying.

Personal Loans

This helps fresh entrepreneurs to get the funding they need. However, this type of loan requires a good credit score standing. Lenders will have a thorough check on your credit history and finances, and you should have at least a credit score of 700 or above to get approved. But since this is a personal loan, one can only have an initial maximum loanable amount of $40,000, and the interest rates can range between 6 percent to 36 percent, depending on your qualifications. Repayment terms, on the other hand, can range only up to five years.

Short-Term Loans

This type of loan is useful for those who have an average credit score and unable to get approved from personal loans. Short-term loans are more popular than a personal loan because of its faster approval rate and much lower eligibility requirement. However, the repayment terms only last up to 18 months maximum. It means that you have to pay a higher amount on your monthly dues as well as high-interest rates. But, if you are an occasional borrower, then this type of loan can still be beneficial to you, especially if you need funds for your inventory and supplies or you need extra capital.

SBA Microloans

If your business needs capital of no more than $50,000, then SBA microloan is the loan you needs applying for. SBA is a government agency that seeks partnership with community-based nonprofit lenders to create this type of loan. Its goal is to support small-time businesses to thrive in the business industry. Interest rates for this type of loan usually come between 9 percent to 16 percent payable up to 6 years.

Nonprofit Business Loans

Similar to SBA Microloans, Nonprofit Business Loans provides small entrepreneurs enough funds to start their business. Also, they believe that in this way, they can help the local economy where the business is located to thrive. However, to qualify for this loan, one should have a good credit score, trustworthy character, and an excellent business plan. Interest rates for this type of loan come between 9 percent to 16 percent payable up to 5 years.

Mortgage Loan

If you are an entrepreneur that owns a house with an existing mortgage through Mortgage Loans El Paso, then you can use your house equity to fund your business. Unlike those loan mentioned above, where it limits their loanable amount to $50,000, you can borrow up to 80 percent of your home equity value using a second mortgage loan. To know more about this type of loan, contact Mortgage Loans El Paso for more details.