What Type of Business Credit Is Right for Me?
Every small business is unique, as well as the funds available to it — so how do you choose the right credit option to set your business up for success? First, you have to understand what each offer means and how it can be used. Read about five popular types of business credit below, or watch this quick video.
First, is the SBA Loan or a Small Business Administration loan. SBA loans are guaranteed by the SBA and often come with lower interest rates and longer repayment terms. The eligibility requirements are a bit more stringent than the other loans discussed in the video below.
Next is an MCA, or merchant cash advance. This product provides rapid financing without requiring a strong business credit history. In exchange for a portion of your business’s future credit card sales, the lender gives you a lump-sum deposit. You pay back the purchased amount with daily or weekly payments taken out of your total credit card sales.
Another option is a term loan. You receive a set amount of funds with a fixed interest rate from a lender that you pay back over a designated period of time.
Then there is invoice factoring. Invoice factoring allows you to sell outstanding invoices to a factoring company, which then gives you a cash advance for the total amount. The factoring company then collects on the invoice, plus interest fees.
Line of Credit
Lastly, there is line of credit. Similar to a personal credit card, once you are approved you have access to the amount you qualified for on a rolling basis.
Now that you are familiar with the types of business credit available, watch the video to learn a what you should ask yourself while considering which funding type fits your small business and its needs.