Loans are essential to starting and scaling your company. They are the key to running and operating the entire system, especially for small businesses and first-time business owners. Everyone knows they should be cautious while choosing their lender, but only a few know that selecting the appropriate loan type is also as crucial. There are several types of merchant business loan products available in the market today, and understanding which one is most suitable for your business is essential.
Let us dive into the ocean of merchant loans and understand which type is right for your business-
Type #1- Term Loans: As the name suggests, you borrow a fixed amount from your lender, which you have to repay at regular intervals and within the specified loan term in term loans. They can be short-term and long-term, with their periods extending from three to eighteen months in the first and five to twenty-five years in the latter. The interest rate can vary depending on your lender and loan amount. The term of your term loan can also vary according to the lender, loan amount, and small business funding requirements.
Type #2- US Small Business Administration (SBA) Loans: SBA loans are similar to term loans, except that about 85% of the loan repayment guarantee is covered by the US Small Business Administration if the borrower defaults. However, in case of defaults, you are not free and clear of your debts. Your assets act as collateral if you fail to repay the lender the total amount due.
Type #3- Inventory Financing: When you purchase inventory financing products, you get money to buy inventory or stock. The goods you purchase become your collateral, and hence assets are never involved in this loan. Retailers and wholesalers that experience seasonal fluctuations usually opt for this option as they are short-termed loans.
Type #4- Accounts Receivable Financing: Also known as invoice financing, you borrow money against your outstanding invoices. It also means you may lose your assets if your clients fall short.
Type #5- Equipment Financing: The short-termed equipment financing loan is excellent if you need money for heavy machines, instruments, or office furnishing. The products purchased with the merchant loan services become your collateral in equipment financing.
Type #6- Business Lines of Credit: Businesses that look for the flexibility of a revolving line of credit than a term loan choose this. Lines of credit may have variable or fixed interest and may be secured or unsecured. You can also repay merchant services small business loans amount on variable schedules.
Type #7- Business Credit Cards: They are similar to personal credit cards and help you cover short-term expenses. Business loans on credit card sales usually have high-interest rates.
About Total Merchant Resources-
Total Merchant Resources has reinvented small business financing by offering reasonable credit standards, minimal documentation requirements, and fast approval. Total Merchant Resources financing empowers you, the small business owner, so that you never again have to let small capital needs stand in the way of big business opportunities. Our products include small business loans, line of credit, equipment leasing, fix and flip programs, and web services. Call us at +1 (732) 671-5710, email us, or visit our website for more information about our services.