Not all business owners have sufficient capital at hand to finance their business. However, it does not necessarily mean they cannot start their business. There are many ways to fund a business and one of them is lending. Business owners have different options when it comes to funding their business. This includes the following:
SBA 7(a) loans –
It is the most popular type of financing option. It can be used for a variety of business reasons. It is the best option for established businesses looking for cost-effective and long-term financing. To qualify, you need to present documents that you have a stable cash flow for two years and your business should be at least two years old.
CDC/504 loan –
It is a loan backed by the government and the certified development company. Basically, it is two loans where SBA finances 50% and CDC finances 40%. The remaining 10% would be the down payment. To qualify for this type of loan, your business must be at least three years old.
Traditional hard money loans –
Unlike the two above mentioned loans, traditional hard money loans are short-term and are used to buy equipment for the business or to renovate a commercial property. Since it is only a short-term loan, the interest rate is high, which could range from 8% to 13%. It also comes with other cost like appraisal fee, closing cost, and lender fee.
Traditional business mortgage –
This type of loan is offered by traditional financial institutions like the banks. The interest rate is low and the loan term ranges between five and 20 years. A thorough assessment has to be made to make sure that you have the capability to repay the loan.
Should you wish to find out more about your available business mortgage options, you should see this.