Most businesses just starting up need to take advantage of secured business loans in order to begin or expand operations. Some start by searching for easy business loans while others have no idea where to begin. As a startup owner, it is important that you know your options when exploring secured business loans for your company. Even if you have a poor credit history, many banks and lenders will allow you to borrow money with a low APR in exchange for some type of collateral. We will breakdown the best secured business loans for your start-up.
Traditional Term Loans
A traditional term loan, also known as a medium term loan, is the most common of the secured business loans. You obtain a lump sum of cash which you will repay along with interest over a predetermined time period. More times than not, a bank will ask that you put up some kind of collateral for your loan — possibly real estate property or other assets you may have. That collateral will of course depend on the bank and how much money you are asking for, along with your credit history. Consider putting up your property as collateral. If you believe you will meet payment deadlines, consider this type of secured business loan for your startup.
Invoice factoring allows businesses to sell off their invoices, or accounts receivable, to a factoring company in exchange for up front capital at a discounted rate. If you cannot afford to wait to pay your employees or other expenses, then you should consider an invoice factoring loan. For owners of startups, waiting for cash to come in could potentially put your business at risk. To meet your current financial needs, you can take a small hit on your invoices in order to get same-day cash. Though you will only get 80-90% of your open invoices, acquiring that money quickly will keep your business running smoothly. If you can settle with losing out on a small amount of your accounts receivable, then invoice factoring may be a good option for a secured business loan for your startup.
Inventory financing allows business owners to take out loans without having to put up their own property as collateral. Instead, the inventory of your business purchased with the loan is used as collateral. This means that you can meet the demands of your company without having to risk your home or other assets. If you default on the loan, you only need to return the stock you purchased through the line of credit. The process can be faster compared to other loan options, though getting approval can be tougher. If you are wary about putting up your property as collateral, then you should look into inventory financing as a secured business loan for your startup.
Taking advantage of an equipment loan can get you the tools you need for your startup to be successful without spending the business’ revenue. An equipment loan grants you a line of credit through a bank or lender. It allows you to replace outdated equipment, repair any equipment that may be damaged, or buy new equipment that your business needs. Lenders will examine your up-to-date business data to determine your reliability and requirements before granting the loan. Those funds could even be secured same-day, meaning you will not have to wait to purchase the equipment you need for your business to thrive. If you do not want to take all of your free cash from the business to buy new equipment, then you should look into equipment loans to meet your needs.
Loans granted by the Small Business Administration are great for startup owners who do not qualify for the usual types of business loans. Business owners in various industries fund their growth through SBA loan programs. The SBA imparts loans to business owners who cannot acquire capital through a bank or other lender. Using the SBA’s Lender Match, you can easily submit a form describing your needs. Typically within two business days, the SBA will match you with multiple lenders. Then you will be able to choose which loan and interest rate you feel most comfortable with. Once you select which lender to go with, you and that lender will complete all additional documents without SBA involvement. Acquiring a secured business loan for your startup through the SBA is a great fall back if you cannot find a bank or lender to assist you.
As the owner of a startup, taking advantage of secured business loans is a great way to help your company grow and it is important that you know your options. A traditional term loan is the most common, but may not be what you are looking for. Invoice factoring and inventory financing loans are both great ways to turn your accounts receivable or incoming stock into up front capital for your company. An equipment loan will get you cash for the tools you need to conduct your business. If all else fails, turning to the SBA for a secured business loan guarantees that you will find a financial institution that will lend you the capital you require. Now you have the information to go and find the best secured business loan for your startup.