The 4 Types of Business Loans and How to Choose the Right One

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If you’ve decided to take the plunge in starting your own business, there’s a high chance that you’re going to need to secure some funding in order to turn your business dream into a reality. Regardless of the industry that you’re planning on operating in, having enough funding is essential for purchasing equipment that you’ll use during day to day operations, renting or purchasing a base, paying for web hosting, paying employees and launching your marketing campaigns.

When it comes to getting funding, you are probably already aware of some of the more popular options, such as getting a business loan from your bank. You may have also looked into some alternative ideas, for example, crowdfunding or pitching your ideas to an angel investor. Understanding the different types of business loans and funding will help you make the right decision for your company’s future.

#1. Traditional Bank Loans:

More often than not, the traditional bank loan is the first option that many new entrepreneurs go for when starting their new business. In most cases, a bank loan is fairly straightforward to get providing that you are fully organized and can provide proof of a stable credit score. However, if you’ve had personal credit issues in the past or your business plan isn’t up to scratch, you could run into problems. It may be worth consulting with a business advisor before applying for your loan, since this will help you improve your chances of acceptance.

#2. Poor Credit History Loans

Following on from the first point, if your application for a traditional business bank loan is rejected, this will probably leave you wondering what the next best step to take would be. Being rejected for a bank loan for your new start-up can be very disheartening, but the good news is that there are several other options available that you might want to consider. A poor credit rating doesn’t have to get in the way of fulfilling your business dreams; there are several poor credit lending options that you may want to look into. Depending on the amount of funding that you need, a small, short-term loan may suffice. In most cases, these types of lenders are more lenient when it comes to your credit history.

#3. Crowdfunding

If you’ve come up with an idea that you think the general public will love, crowdfunding could be a viable idea for raising the funds that you need to get things off the ground. You can find a large number of online websites and apps that allow new business owners to ask for crowdfunding from seasoned investors or even members of the general public. A crowdfunding scheme allows people to invest their money in your business, meaning that there’s the potential for them to earn more as a shareholder.

#4. Small Business Lending Marketplaces:

Another option that you might want to consider is a small business lending marketplace. These tend to be easier to navigate than the process of getting a bank loan, since they are dedicated to helping new businesses get off the ground. Once in the marketplace, you will be connected to a large network of lenders who you can then pitch your ideas to and apply for the funding that you need. This can help your business significantly during the early stages, since finding a lender who enjoys your idea could secure you more funding than you’d get from the bank.

From traditional bank loans to crowd funding apps, there are several different methods of securing funding for your new business that you might want to consider.

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