Banks, credit unions, non-bank lenders, and governments offer small business loans. Many businesses apply for government financing because of the longer payback period.

Types of Financing

There are different financing options, including angel investors, small business loans, equipment leasing and financing, and others. Private lenders are also a source of funding, offering lines of credit, conventional and commercial loans, etc. Secured and unsecured loans differ when it comes to interest rates, repayment periods, and collateral. Secured loans require some form of collateral such as real estate holdings, machinery and equipment, interest earning deposits, inventory, fixtures, and others. Unsecured loans are offered to regular and creditworthy customers because collateral is not required. Banks also offer term, commercial fishing, and conventional loans. Traditional lenders such as brick-and-mortar banks usually offer debt financing. Real estate loans are often used to buy warehouses, dental and medical offices, and retail buildings. Lenders offer financing for purchases, improvements, and business expansions. Banks provide micro-loans to young businesses and start-ups. The money can be used for the purchase of machinery and equipment, furniture, supplies, and so on. The interest rate usually varies between 8 and 13 percent. Short-term loans are another option if you need cash for purchases, inventory, or accounts payable. In general, the funds can go toward expansion, operation, and acquisition.

How to Apply

The documents required vary from one bank to another. Business owners must submit documents such as financial statements, bank statements, business plans, resumes, and income tax returns. One of the requirements is to prepare your financial documents and statements and make them available for a review. Bring your cash flow statements, corporate resolution, and proof of non-business income. If you are applying together with a cosigner, you need to present recent paystubs. Legal documents to submit include commercial leases, franchise agreements, and others. Some banks also require that applicants submit copies of contracts and business registrations. Make sure you write a solid business plan to increase your chances of getting approved.

Alternative Arrangements

Financial institutions and non-bank lenders offer different types of loans, including revolving check credits and line of credit loans. There are different options to consider, including residential equity lines, construction financing, as well as business acquisition loans. Business acquisition loans help companies to purchase existing businesses.