Small business loans are popular government-backed financing options that can be used for a variety of commercial purposes. These loans typically have terms of up to 25 years and offer moderate interest rates. SBA loans are widely available through banks, although the application process can take anywhere from five days to two months or longer. Short-term loans, on the other hand, have repayment periods of a few months to a year or more and can be approved in as little as a few days, even for business owners with bad credit.
However, higher rates may be charged as compensation for speed and accessibility. Working capital loans are short-term loans that are disbursed 24 hours to one week after approval and are designed to finance the company's daily operations during a period of reduced activity. When the break is over and the business grows again, you should have enough income to repay the working capital loan. Interest rates on commercial loans range from a low 3% for a traditional bank to 150% for alternative lenders.
SBA 7 (a) loans, one of the most affordable commercial loan products available today, have loan rates that range from 6% to 8%.Even if your credit isn't great or if you're looking for financing to start with, you shouldn't assume that you can't qualify for an affordable loan product. Some business owners choose to use their personal assets, including their homes, as security for a business loan. If SmartBiz isn't for you, Lendio offers a loan search service for SBA loans and other types of business financing. Lenders generally like to see that the borrower has a deep understanding of the company's financial operating cycle. Working capital loans can offer quick financing in the form of short-term loans, lines of credit and more to cover operating costs, such as rent or payroll.
If your business has been affected by a disaster, you may be eligible to apply for a long-term, low-cost loan for physical or economic damage. If you run a for-profit business, you are likely to qualify for an SBA 7 (a) business loan. Many business loans, especially SBA loans and bank loans, derive their interest rates from the market's prime rate. Not only does the strength of your personal credit score influence the financing options available to you in the first place, but it will also have a direct impact on the business loan rate you'll end up qualifying for. The application fee is generally non-refundable, even if the lender doesn't approve the loan.
However, as a general rule, commercial loans with low interest rates are usually reserved for those in the best financial situation. You can calculate your working capital by subtracting the company's debts that are due within a year from the current assets that you can convert into cash. Knowing these additional fees will help you better compare business loan rates and make the best decision for your business.