If you’re thinking about Growth, Safety, Efficiency and Certainty, and you know which areas are most important for your small business, it’ll be much easier to work out which features are fundamental and which ones you can afford to pass up.
If you need funds for expansion, renovations or to buy inventory and equipment, you may want to look at two types of loans that are geared towards growth: secured and unsecured loans. Secured business loans require that you own some sort of asset that you can offer to the lender as 'collateral,' whereas an unsecured loan does not require any asset. Secured loans have better interest rates, while unsecured loans are best for fast approval with no security.
Some business loans are geared towards giving you peace of mind, knowing that you have easy access to funds for day-to-day, and unexpected, expenses. There are two main types of safety loan: overdraft and line of credit. An overdraft is a feature that can be added to your business banking account, allowing you to 'overdraw' your account, even when your balance is zero. A line of credit is a standalone facility that can be drawn from as needed. Both options have similar interest rates and repayments are made only when you draw funds.
You may be looking at taking out a business loan to purchase new equipment or vehicles so that you can serve more customers. For example, a cafe owner may want to upgrade their espresso machine to reduce wait times during the early morning rush. The greatest advantage of an efficiency loan is that the item you purchase becomes the security for the loan, which means that you do not have to offer any further collateral.
There will be times when you need to access cash ahead of time. There are two types of certainty loan: debtor finance and cash advance. Both options allow you to receive upfront cash. Debtor finance lets you access cash from your accounts receivable or invoice ledger, whereas a cash advance provides you with funds based on your monthly sales.
What’s the takeaway?
Think about the purpose of your business loan. Do you have an idea of how much you’ll need and for long? You can research your business loan options using a service like Valiant’s business loans marketplace, or have a chat to our team of credit specialists. You may also want to consult your accountant, lawyer or trusted business advisor.
Jacob leads the Working Capital team at Valiant. He is the go to guru for assisting small business owners with their everyday business finance needs.