Looking for new business loans can be an intimidating process. You're already working too many hours keeping your business afloat, and somehow you must find time to complete the lengthy business loan application process, which, sadly, is more difficult than that of other loans. It's sometimes hard to know even where to begin. However, if you can pinpoint the type of new business loans you'll need, the process will be a bit simpler. To simplify your search and prepare you for dealing with commercial lenders, here are your options for new business loans. All you'll have to do is match the type of loan to why you need the money. The world of new business loans will seem much nicer once you know what you need, and lenders' will be impressed by your preparedness.  

Get Your Business Up and Going

    When your business is just an idea, you're going to need some money to get you started. The standard start-up business loan is an intermediate-term loan ("BBBTips on Business Credit"). Those loans are ideal for starting a new business because they don't have to be repaid for one to three years, and they provide a large lump of cash to cover up-front purchases and expenses. A term length of one to three years should give you enough time to put your business up on its feet before you have to pay the loan back. Also, because you're receiving a large, lump sum of money instead of many small payments, you can buy the necessary capitol for your businesses.

Just a Little Extra During a Slow Season

    Your business is bound to have some good and bad seasons. The secret to a successful business is managing the money so you have enough cash available from the good seasons to cover your expenses during the bad ones. However, despite even the best planning, sometimes you'll need a little extra to get you by until your profits pick back up. For those occasions, a short-term loan or line of credit are your best options. A short-term loan provides a small amount of money, enough to cover your cash shortage, and must be paid back within one year ("Applying for Business Credit?"). A credit line enables you to borrow money, up to the specified amount, any time you need it. It's also convenient if you expect to need money frequently in the future because you don't have to reapply each time ("BBBTips on Business Credit").

Expansion is in the Future

    Your business is doing well, and you see opportunity to expand. To take advantage of the opportunity, you'll most likely need a lot of money. New equipment, more employees, bigger facilities, all of those costs add up. Luckily, if your business is successful enough to be able to expand, lenders will look more kindly upon you than a start-up because you have a proven track record. Regardless of how lenders will see you, new business loans often used for expansion are long-term or intermediate-term loans. Whether you need a long- or intermediate-term loan will depend on how much money you need. The more money you need, the longer term length you'll want. Intermediate-term business loans are paid back within three years while long-term business loans can take up to 10 years (Basic Books). A realistic look at your budget will help you decide which type of new business loans you can afford. You'll want to pay off the loans as soon as you can to save from paying extra interest. So, try to budget for the largest monthly payments you can afford. An amortization table will be a big help with that.

Unplanned Repairs, Updates and Maintenance

    Downtime for a business can be disastrous. So, you don't want to draw out the loan application process any longer than neccessary. Knowing the type of new business loans you'll need will help reduce that time. For large construction, vehicles, real estate, furnishings and fixtures and durable equipment, you'll want a long-term loan ("BBBTips on Business Credit"). For smaller equipment and remodels, intermediate-term loans can foot the bill. Besides the amount of the loan, your term length will also depend on your ability to repay the loan. The larger monthly payments you can afford, the shorter your term length can be.

    Regardless of the reason for needing new business loans, knowing which type you need will help in may ways. It'll not only reduce your stress and confusion, but also make it easier for you to deal with lenders. Not to mention that lenders will appreciate your preparedness. So, before you start your search for new business loans, take the time to figure out what you need.


The Rest of Our Small Business Loan Guide: