- Restaurant Revitalization Fund (RRF): Created to provide relief to restaurants, bars, and other related businesses affected by Covid-19. This fund prioritizes businesses that are 51% or more owned by women, veterans, and socially and economically disadvantaged individuals.
Some of these funds are available until exhaustion. Protect your business from other emergencies with business insurance. Before selecting an insurer, check our selection for the best business insurance.
How Do Business Loans Work
A small business loan is a type of loan where capital is provided at a fixed interest rate to qualifying business owners. Similar to a personal loan, a business loan requires an application, documentation that establishes creditworthiness, tax returns, and a good credit score.
There are different types of business loans and financing options; however, for small businesses, the Small Business Administration has partnerships with banks and lenders to provide loans and microloans with competitive terms and lower down payments. Business loans come in a variety of terms, borrowing amounts, and interest rates.
Types of business loans
- SBA 7(a): The most common type of small business loan is best suited when the borrower is interested in acquiring real estate. However, this loan can also be used as short- and long-term working capital, refinance, furniture and supplies, acquisition, and expansion.
- SBA 504: This loan provides fixed-rate financing up to 5 million dollars to promote business growth and employment development. This cheapest payday loans in North Jackson Ohio loan can be used to purchase land, facilities, equipment, and renovations. The SBA 504 loan cannot be used as working capital, paying or refinancing debt, or investing in renting real estate.
- Microloans: This program assists small businesses and specific non-profit childcare centers. There are microloans available up to $50,000. This type of loan can be used as working capital and the acquisition of supplies, equipment, furniture, and inventory.
In addition to the loans offered by the Small Business Administration, there are several other options for business owners who need financial assistance.
- Lines of Credit: Work as an emergency fund that allows borrowers to obtain a specific amount and only use a portion of the fund as the need arises. You pay interest on the quantity used, and repayments are scheduled daily, weekly, or monthly.
- Invoice Factoring: You can use unpaid invoices as collateral for the cash flow loan. Once you receive payment from your customer, you repay the loan plus any interest and fees.
- Merchant Cash Advances: The lender advances you an amount of money guaranteed by your future credit and debit card sales. Repayments are taken from these future sales instead of within a set term.
- Vendor Credits: You work out an arrangement with your vendors to get time to pay for a product or service instead of having to pay for it on delivery. There is no interest tied to vendor credits, and a fee will only be charged if you fail to pay within the predetermined period.
- Business Credit Cards: Can be a source of immediate funding for a business needing some short-term cash flow.
- Personal loan for business: An option for startup companies and new businesses without a strong record. These loans have high APRs and report to your personal credit history.
Business Credit vs. Personal Credit
When applying for a business loan, it is vital to keep in mind that lenders will look at your business credit score, and they will also consider your credit score.
Your personal credit score is different from your business credit score. However, both measure creditworthiness and the ability to pay back loans. FICO credit score ranges from 300 to 850, based on your individual credit profile. Your business credit score is usually measured from zero to 100.
