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It takes money to make money, as the saying goes, which means that all business leaders need to know the optimal ways of securing funding to achieve business success. However, too many business leaders know embarrassingly little about business loans, which means they are unable to take full advantage of lending options to help their business survive and thrive.
If you are a business leader wondering how do small business loans work, the answer might be more complex than you expect. There are many different types of small business loans, as explained below, and learning about your options can help you make the right decisions for your business’s future.
SBA Loans
SBA loans are guaranteed by the U.S. Small Business Administration (SBA), which reduces the risk assumed by the lender and therefore allows a larger number of entrepreneurs to acquire funding to launch or grow their small ventures. Interest rates on SBA loans can vary greatly, between 2.8 percent and 13 percent, and repayment terms can extend up to 25 years, depending on the loan program. Generally, SBA loans are some of the most affordable ways for businesses to secure financing, but the requirements to obtain them can be quite strict. You should talk to an expert to learn more about all the different types of SBA loans available to you.
Term Loans
Term loans tend to be what most people imagine when they think of small business loans. Businesses acquire term loans from lenders and repay them over a fixed time period, typically with a fixed interest rate. Interest rates for term loans tend to be around 9 percent and the average repayment term is roughly 10 years. While you can acquire a term loan relatively quickly, especially if you have good credit, you may need to make a personal guarantee, which puts personal assets… Read More
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