There are different types of loans and funding options that small businesses can consider acquiring to serve multiple operational and non-operational needs. However, every business is unique in terms of its capital needs, core business activities, organizational structure, workplace environment, employees’ profile, clientele, etc. Henceforth, SME businesses are required to choose loan products accordingly.

 

Here I’m going to list down a few types of business loans that startups or small businesses can feasibly apply for in 2021. 

 

• Term Loans

A business term loan is more like a traditional bank loan, but it is a feasible option for small business owners when it comes to rapidly acquiring loans online and at better rates. Many lenders are available online who are offering term loans to SME businesses against smooth installment payments every month. The borrowers will be required to pay a certain set of money plus an interest fee. Term loans come with easier qualifications and small business borrowers can access funds in less than a week. Business term loans are best suited for company expansion projects and one-time purchases. 

 

• Business Lines of Credit

Business lines of credit is a popular type of loan option that has mainly three types: Unsecured Lines, Secured Lines, and Short-Term Lines. The first one is the type of loan that a small business can directly acquire from banks but usually at higher rates of borrowing cost. The second one is the type of loan that a small business can acquire from banks and NBFIs in exchange of collateral. The interest cost is lower in this case. The third one can either be a secured or unsecured loan, depending on the small business’s needs. It is one of the best types when it comes to providing instant funding to a new or younger business. Short-term lines of credit can well-serve the immediate capital needs and steady cash flow.

 

• Online Business Loans 

Presently, online loans are considered one of the ideal funding options for SME organizations that are looking for a structured form of borrowing money. Online lending is preferred over traditional bank borrowing due to the less complicated application process, better rates, and quick financing. Online loans are also known as fast loans. Online loans are an attractive option for small businesses in terms of minimal documentation requirements, 24/7 loan availability, and user convenience. 

 

• Equipment Loans 

In today’s highly competitive industrial environment, equipment financing is quite common. Many medium-to-large enterprises approach banks and non-banking financial institutions every year to avail equipment loans. This type of financing is well-suited for a smaller organization specifically if it is looking to get funds for the purchase of plant & machinery, office equipment, generator sets, etc. With this type of loan, a small business owner can take out a loan and collateralize the amount with the plant, machinery equipment, etc. This can substantially ramp up the chances of getting better rates on requested funds.

 

• Microloans

A microloan is a specific type of small business loan that defines the loan limit of $50,000 or less. Small business owners cannot acquire more than the mentioned limit. Microloans work well for partnership firms and sole-proprietorship concerns. Microloans are often recommended to startup businesses that need a small amount of money to finance their setup. Microloans are also acquired by small businesses with weak credit histories. 

 

• SBA Loans

Small Business Administration (SBA) loans are recommended to SME enterprises as these are low-cost loans backed by government programs. Small business owners cannot directly acquire SBA loans rather they will have to work with the banks and other non-profits organizations. A certain portion of SBA loan is always backed by the federal organization that comes with better terms and low borrowing cost. SBA loans are suitable for business growth, debt refinancing, and meet working capital requirements.