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Financing for small businesses takes different forms. Business loans are usually an easily accessible option for upcoming and developed businesses. With a loan, you can borrow a little or a lot, for just about everything you need and with a minimum of obstacles.

Depending on the loan path you decide to pursue, applying for and obtaining a commercial loan is one thing you can do in just a few days. With so many types of business loans, it’s essential to choose the type of financing that’s right for you. We will explain the most common types of business loans to help you determine which one is right for you.

Term loans

  • Amount of loan – $10,000 to $1 million
  • Loan duration – 1 to 10 years
  • Interest rate – 6% to 30%
  • Financing Speed ​​- as little as two business days

Ideal for: Business owners who need short-term Business Cash Advance to cover their temporary cash deficits; companies with sufficient collateral to borrow larger amounts to finance expansion projects or to purchase equipment and inventory.

Business term loans are the simplest loan option for business owners. You gain a Business Cash Advance from the lender, which is repaid over a given period, with a fixed or variable interest rate. Term loans can be secured or unsecured, and generally, some form of collateral is expected when you need a larger loan or a longer repayment period.

Short-term loans are designed for businesses that need to borrow smaller amounts and can repay them fairly quickly, usually in 18 months or less. Qualifying for a short-term loan is less difficult than getting a long-term loan as long as you have a good personal credit rating. However, there is a tradeoff to make because the interest rate can be higher.

A long-term loan offers higher borrowing limits and longer repayment terms, sometimes up to 20 years. Bond Street also offers a third option in the form of an interim loan with terms ranging from 1 to 3 years. If you would like to know more about Bond Street’s term loan options or if you are ready to apply for a loan, click here to create an account and check your rate.

Merchant cash advance

  • Loan Amount – It ranges from $5,000 to $500,000
  • Duration of the loan – One week to 36 months
  • Factor rate – 1.1 to 1.5
  • Financing speed – as little as 24 hours

Ideal for: Established businesses with stable sales of credit and debit cards that require quick financing but do not have the collateral or credit rating required for a traditional loan.

A cash advance from a merchant is not a loan per, but a way for businesses to quickly access capital. The principle is quite simple: the merchant’s cash advance provider gives you an amount based on future sales of credit and debit cards. You pay the money by paying a percentage of daily income from credit and debit cards.

Although practical, cash advances from traders often come with high-interest rates and fees. Providers use a factor rate to set fees and determine the amount reimbursed. For example, if you take a $ 50,000 advance with a factor rate of 1.4, you will have to repay $ 70,000, excluding interest.

Merchant cash advances are one of the most expensive borrowing options in terms of APR. The more your business generates credit and debit card sales each day, the more the APR increases and the amount of interest you pay may reach a three-digit range. In the end, you must weigh the cost carefully when considering a merchant cash advance.

Start-up loan

  • Loan amount – $500 to $750,000
  • Loan duration – 1 to 5 years
  • Interest rate – 7% to 30%
  • Funding Speed ​​- 14 to 60 days

Private lenders offer start-up loans. They are ideal for start-ups that need financing to move from the design phase to the production of a concrete product or service. A start-up loan can be a precursor to seeking additional funding from angel investors or venture capital groups.

The borrowing limits vary depending on the lender, as well as the terms of the loan. Payments are made monthly. To qualify for this type of loan, you must have a good personal credit rating and be able to file your personal tax returns for the previous two years.

The commercial line of credit

  • Loan Amount – $2,000 to $3,000,000
  • Loan duration – 6 months to 10 years
  • Interest rate – Premium + 1% to 32%
  • Financing Speed ​​- as little as two business days

Ideal for: Companies that have been operating for at least 12 months, have a minimum annual income of $60,000 and need permanent working capital.

Business lines of credit can be obtained from traditional banks or private lenders and operate as a credit card. Business lines are renewable, which means that you must make a minimum payment every month, but you can continue to use drawings on this line as long as you have the available credit.

This type of loan most often has a variable interest rate and fluctuations in the prime rate can affect the amount of your payment. Some lenders charge annual fees to maintain a line of credit. A warranty may or may not be required.

Accounts Receivable Financing

  • Loan Amount – Up to 90% of pending bills
  • Loan duration – usually 30 to 90 days
  • Factor Fees – Processing Fee of 2% to 3%, plus a percentage of outstanding invoices
  • Financing Speed ​​- 24 hours to 2 weeks

Ideal for: Growing businesses that have positive cash flow and need short-term flexible financing.

Accounts receivable financing, also known as invoice financing or factoring, is similar to a cash advance from the merchant. Companies offering this type of financing provide businesses with liquidity by using the company’s outstanding invoices as collateral. It is possible to borrow up to 90% of the value of your current bills.

Loans for equipment and construction

  • Amount of the loan – $5,000 to $1,500,000
  • Loan duration – 6 months to 10 years
  • Interest rate – 7% to 30%
  • Funding Speed – 4 to 10 days

Ideal for: Well-established businesses that need to finance the purchase of equipment or the construction or renovation of a building occupied by its owner.

Buying equipment for your business or building a new building can be expensive, but fortunately, there are business loans designed solely for these purposes. Private and traditional lenders make these loans available to well-established businesses with a steady stream of revenue.

Peer-to-peer loans

  • Amount of the loan – $2,000 to $500,000
  • Loan duration – 1 to 5 years
  • Interest rate – 6% to 36%
  • Funding Speed – 2 to 14 days

Ideal for: new businesses that need to borrow larger amounts but do not have enough credit to get a bank loan.

Personal loans have become an increasingly popular financing option for small businesses. This type of commercial loan is funded by a group of investors who each claim a share of the interest you pay. Prosper and Lending Club is among the most visible P2P loan platforms. In addition to paying interest on the loan, borrowers also pay fees to the platform.


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