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Types of Business Loans You Can Go in for in 2020

By Finserv MARKETS - Jan 31,2019
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Types of Business Loans You Can Go in for in 2020

When it comes to business loans, it’s easy to know when you need financing, but understanding which type of business loan should you go for can be a real challenge. With business loans there is no ‘one-size-fits-all’ solution because eligibility criteria, interest rates and terms differ with each type of loan.

Here are the different types of business loans available if you are looking to finance your business

Term Loans

Term loans are a way of business financing where you get a lump sum amount that you can then repay with interest, over a period of time.

Pros of Term Loans

Cons of Term Loans

  • You get cash upfront which you can invest in your business

  • Higher borrowing amounts

  • If you go through online lenders, the funding is fast as compared to traditional banks

  • Term loans may require collateral or personal guarantee in case you default

  • The costs of term loans may vary. Online lenders usually carry higher costs than traditional banks

Term loans are good for individuals who are looking to expand their business. It is a great loan if you are someone who has a good credit and a successful business and wouldn’t want to wait for too long for funding.

SBA Loans

Small Business Administration Loans are offered by lenders and banks. On SBA loans the repayment period would depend on how you decide to use the money.

Pros of SBA Loans

Cons of SBA Loans

  • High borrowing amounts

  • You get some of the lowest rates on the market

  • Longer repayment terms

  • Very rigorous and long application process

  • Hard to qualify for SBA loans

This type of loan again, is good for the ones who wish to expand their business or even to refinance existing debts.

Business Lines of Credit

With this type of business loan, you can get funds up to your credit limit. So, you pay interest on only the money you have drawn.

Pros of Business Line of Credit

Cons of Business Line of Credit

  • A very flexible way of borrowing

  • No collateral on this type of loan

  • This loan may come with additional fees and costs

  • For this loan, you require strong credit and revenue

This loan is great for seasonal businesses or unexpected expenses.

Equipment Loans

As the name suggests, this loan would help you in buying equipment that is needed for your business. The term of the loan would depend on the life span of the equipment. The equipment would ideally serve as the collateral for the loan. The rates would depend on the strength of your business and the value of the equipment as well.

Pros of Equipment Loans

Cons of Equipment Loans

  • With this type of loan, you own the equipment and can also build equity

  • If you have good business finances and a strong credit, you can get competitive rates

  • You may have to arrange for down payment

  • The equipment you purchase could become outdated, this could be much quicker than the length of your financing

Invoice Factoring

Invoice factoring works in cases when your business has any unpaid customer invoices that are paid in 60 days. So, if you cannot wait for too long to get paid and need the money soon, you could get the cash for your unpaid invoices through invoice factoring. The factoring company would be responsible for collecting the amount that is due from the customer.

Pros of Invoice Factoring

Cons of Invoice Factoring

  • Fast cash

  • Easier approval

  • Costly than other options

  • Lose control over the collection of your invoices

Merchant Cash Advances

With this type of business loan, you get a lump sum amount up front that you could then use for your business. With this loan, you could make payments on a merchant cash advance.

Pros of Merchant Cash Advances

Cons of Merchant Cash Advances

  • Unsecured financing

  • Fast cash

  • Due to frequent payments, this could cause cash flow problems

  • Highest borrowing costs

Personal Loans

You could also go in for a personal loan for your business at Finserv MARKETS. This is a great option for start-ups since banks wouldn’t really lend to businesses with no solid history of running a business. The approval of a personal loan would depend on your credit score, but you would also need good credit for you to qualify for a personal loan. Finserv MARKETS offer personal loan with various benefits such as loan amount up to 25 lakh, zero collateral, flexible payment tenures, value added services and lot more.

Pros of Personal Loans

Cons of Personal Loans

  • Fast funds

  • New businesses or start-ups can qualify for this loan

  • Small borrowing amounts

  • High borrowing costs

  • If you fail to repay it can hurt your credit

Machinery Loan

Availing a machinery loan can be of great help if you are looking forward to expanding your business. This type of loan can be used to lease, repair, or upgrade any equipment or machinery. Moreover, you can also consider obtaining a machinery loan to buy additional machinery, or to manage inventory. Machinery loans provide you the flexibility of obtaining the necessary equipment without additional collateral. Machinery loans can also be used to meet the financing needs of manufacturing business segments such as industrial plants, metal equipment, and machinery, etc.

Pros of Machinery Loans

Cons of Machinery Loans

  • Funds to purchase, repair, or lease equipment and machinery

  • No need for additional collateral

  • Increases the business revenue

  • Higher interest rates than traditional loans

Commercial Real Estate Loans

A commercial real estate loan can be helpful in financing the purchase of a building, shop, office space, or other commercial property. If you wish to expand your business by purchasing a new office space, or manufacturing facility, you can consider opting for commercial real estate loans.  This type of business loan is a self-secured loan, wherein the purchased property acts as collateral.

Pros of Commercial Real Estate Loan

Cons of Commercial Real Estate Loan

  • It can be helpful in expanding office space and developing infrastructure.

  • Short-term loans

  • Hassle-free application process

  • More scope for negotiation

  • Comparatively higher interest rates

  • Higher down payments and closing costs

  • Not accessible to new investors

Now that you are well aware of the various types of business loan, ensure to make the most of it for the growth and expansion of your business.

Finserv MARKETS offers Bajaj Finserv Business Loan, you can apply online from the comfort of your home and enjoy a host of benefits of business loan that include flexible repayment tenures, instant approval and a host of value-added services.

“Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!”

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522