What is a business loan?
A business loan is a type of loan that business owners take out in order to access funds for inventory, payroll, and other business expenses. Business loans come in many different forms, although traditional small business loans tend to be offered as a lump sum and with a fixed monthly payment and interest rate.
However, there are other types of financing available for small businesses. Lines of credit are a popular option because they allow business owners to borrow only what they need. Additionally, invoice factoring can be useful for some business owners who are strapped for cash but have a lot of unpaid invoices to use as collateral.
Small business owners can also apply for a SBA loan, which is a type of loan backed by the Small Business Administration. While the SBA does not lend money itself, it matches borrowers with SBA approved lenders who offer SBA guaranteed loans at competitive rates and terms.
Are you personally responsible for an SBA loan?
When you apply for an SBA loan, you must provide unlimited personal collateral if you own 20% or more of the business. This means that, if you don’t repay the loan because the business goes bankrupt, you are still obligated to repay the entire loan amount. Also note that in the event of a borrower default, the lender can recover 50-85% of the outstanding loan balance from the SBA.
What can I use a small business loan for?
Approved applicants can use their small business loan funds to pay for all running expenses as well as payroll or investments in equipment or inventory. Small business loans are also frequently used as a means of managing or smooth cash flow when expenses exceed income. If you are a small business owner who needs to buy equipment but are waiting to get paid by a few large clients, for example, this could help you meet your expenses and buy equipment. equipment while waiting for your bills to be paid.
Other popular uses for small business loans include raising capital to hire new staff or to start a new marketing or advertising campaign that could help increase income.
How we choose the best small business loans
We looked at over 20 lenders who offer small business loans, small business lines of credit, and unique financing options like invoice factoring. We have researched lenders who offer transparency about their loan products and eligibility conditions, and we have also researched lenders who display ongoing fees and costs prominently on their websites.
To find the best small business loans of 2021, we compared loan options and lenders to find companies with great ratings and user reviews on sites like Trustpilot. We have also researched lenders who offer high loan amounts and flexible repayment options, as well as the ability to apply for and set up loan financing online.