Selecting the right type of lending vehicle requires careful consideration. You’ll find yourself inundated with the sheer volume of qualifying requirements and loan-value amounts. Selecting an inappropriate business loan type may not present good values or interest terms. Furthermore, documentation requirements for these lending tools vary vastly.
As an illustration of the above, a startup lending option requires several years of financial history, the owner’s stake in the business, and credit history. Whereas applying for a business acquisition loan presents fewer time-constraining aspects, i.e. an existing cash-flow and a credit history. As we move through defining these various options of business finance support, you’ll develop a broad understanding of the best option for you.
The Different Business Loan Types
As you consider the types of business financing for your business, you’ll find that there are several factors to consider. Regardless if you need startup funding or commercial real estate funding, we’ll help you understand the different borrowing options and their requirements.
Terms and Rates
Business Acquisition Loan
Tailored for purchasing businesses
$5,000 - $5 million
Facilities can be revolving or 10 to 25 years; Interest rates vary
Business Lines of Credit
It may be used for office supplies, salaries, or other business expenses
$10,000 - $100,000 and above
Linked percentage; unsecured and secured loans offered
Commercial Real Estate Loans
Ideal for purchasing company assets and upgrading profit-generating buildings
$100,000 - $500 million
Between 75 - 85% LTV; term is 20 to 30 years, interest rates vary
Suited to businesses that require equipment without paying the full sum
$3,000 - $5 million
Between 8% and 30% interest; up to 7 years repayment term
Ideal for expanding business or raising capital
Dependant on franchise
LTV ranges of 70% to 85%
Merchant Cash Advance
Raising capital for cash flow
$5,000 - $200,000
Interest rates from 18%; 4 to 6 months receivables; 1.2 to 1.5 factor rate
Utilized for smaller business payments
Typically up to $50,000
Usually 6 year fixed term; 9% to 16%
Accessible to all businesses and individuals who need finance options
$500 - $5.5 million
Repayment terms vary interest rates 8% to 13%; 2 years financials, debt schedule, and a business licence.
Secured Business Loans
Specific to businesses with assets to cede
Values vary depending on the venture.
Interest rates are generally lower than unsecured loans.
Unsecured Business Loans
A business credit card.
Values vary depending on the requirement
High-interest rates; Short repayment term
Startup Business Loans
Designed for new businesses
$500 - $750,000
0% to 17% interest; up to 25-year term
Ideal for starting a small business or funding needs
$5,000 - $2 million
1 to 5 years; Interest starts at 6%
Businesses that require fast access to funds
$ values are determined by the applicant
90+ day invoices excluded; 10% to 25% interest rate; additional fees apply