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Loans for Small Business
At Headway Capital, we offer a commercial line of credit of up to $50,000. Small businesses can use these funds for a wide range of business expenses, be it for working capital, equipment, inventory or payroll. If approved, you can borrow as much as you need (up to your credit limit), as many times as you need to, without having to reapply! As you repay the amount you’ve drawn, your available credit is replenished, so you can keep your business running at full strength at all times.
Comparing Different Types of Commercial Loans - Pros and Cons
Business Line of Credit
A line of credit is a lot like a business credit card: A lender approves you for an amount of money that can be drawn on whenever necessary. You only pay interest on the funds you take out. As you repay the lender, your money is available again without having to reapply for the loan.
Pros & Cons: Lines of credit are among the most flexible loans available for businesses, allowing you to withdraw when you need and repay on a flexible payment schedule. One of the few downsides could be the limit. Every business receives a limit on the amount of financing they can draw, but that amount is available again as it’s repaid.
The terms of these loans are generally flexible to a business’s needs and vary as such.
Pros & Cons: Business term loans are good if you have a specific need or goal that necessitates the loan. They can sometimes be difficult to apply for and obtain, and they only allow you to borrow the initial loan amount unless you reapply.
Merchant Cash Advance
A merchant cash advance provider reviews a potential borrower’s daily credit card receipts and determines if they can repay the cash advance in a timely manner. Then, a small business “sells” a portion (cost expressed as factor rate) of those credit card sales to the lender to acquire the advance.
Pros & Cons: These can be a reliable method for receiving fast funding, but keep in mind that factor rates are not equal to interest rates. Depending on the estimated time to deliver the funds, the actual cost can be more or less expensive than any other loan offering.
The Small Business Administration is a government agency that helps encourage lending to small businesses by guaranteeing a portion of the loan.
Pros & Cons: Without the SBA’s guarantee, many lenders would not consider working with startups that have little experience or business credit. But SBA loans require more paperwork and more time to secure the loan, and approval is still far from guaranteed. These loans still require good credit.1