Small business loans can help women start their own businesses and grow them into thriving businesses. These are the most common types of small business loans for women and other business owners:
US Small Business Administration (SBA) loans are offered through a number of SBA-backed banks, online lenders, and other financial institutions. Depending on the type of loan, available amounts range from $30,000 to $5 million, with interest rates varying depending on the type of loan and lender. Many of the SBA’s loans target startups and borrowers in underserved communities, as well as businesses owned by women and minorities.
SBA Small Loans
SBA’s Microloan Program helps new businesses get off the ground. The loans are smaller than other SBA loans (up to only $50,000), but are often easier to qualify for businesses with limited financial records or credit history. Terms vary by lender but generally extend to six years, and interest rates are typically between 8% and 13%.
long term loans
A term loan is a traditional loan in which the borrower receives a lump sum of cash that must be repaid within a specified period of time (usually three to 24 months). These loans are available from banks, credit unions, and online lenders, but they can also be obtained from peer-to-peer lenders – allowing individual investors to work directly with businesses in need of financing.
Term loans may be limited to use for certain purposes—such as financing stocks or other large purchases—but they are generally a flexible borrowing option for business owners who need access to a large amount of cash. Typically, term loans are available up to around $500,000, with annual percentage rates (APRs) starting around 9%.
lines of credit
A credit line is a set amount of money that a business owner can access as needed. If part of the credit line is paid off early, the borrower can reuse that money. When the withdrawal period expires (usually up to five years), the repayment period begins and the borrower cannot access the revolving funds.
Borrowing limits are often between $2,000 and $250,000, and borrowers charge an annual interest rate of 10%-99%. It’s worth noting, however, that interest is only charged on a portion of the credit line already in use – not the entire available balance. This makes lines of credit ideal for business owners who prefer access to cash on an as-needed basis rather than all at once.
As an alternative to unsecured loans, asset-based financing allows businesses to obtain loans that are secured by valuable collateral, such as receivables, plant and equipment, inventory and real estate.
This type of financing poses less risk to lenders because they have the ability to restore the underlying collateral if the borrower fails to make payments on time. As such, lending qualifications may be less stringent and interest rates more competitive – making it a good choice for business owners with poor credit or a limited credit history.
Billing factoring is a common type of asset-based financing that involves selling bills owed to a company to a factoring company for a lump sum cash – usually between 80% and 90% of the total invoice amount. Purchase of equipment with factory financing and inventory financing directly through the vendor are other common examples of asset-based financing.
cash advances to the merchant
A merchant cash advance, or MCA, is a type of financing that allows business owners to receive a lump sum cash payment against a portion of future sales receipts. Instead of making monthly payments like traditional loans, MCA accounts are repaid through individual company sales or through daily or weekly Automated Clearinghouse (ACH) payments, usually at a factor rate between 1.2 and 1.5.
MCA accounts are often available through merchant service companies, further simplifying the application, financing, and payment process. For this reason, this type of financing may be a suitable option for companies with large sales volume.