Running a small business can be incredibly stressful. Indeed, a study by Office works revealed that 45% of Australian small business owners feel that their stress levels have climbed in the last year.
Naturally, the problems often stem from a shortage of cash. Getting a good business loan can be a huge help, but which type should you be most interested in?
No Assets? Try an Unsecured Bank Loan
This is a traditional bank loan. It isn’t secured against any assets or property, which means that it is a fairly high risk option from the lender’s point of view. If you don’t pay it back they will need to fight to get back their money.
Because of this, unsecured loans are typically more expensive than the secured type. They can also be awkward to arrange since the bank will have strict lending criteria. However, if you don’t have any assets it can be a decent option.
Got Assets? Ask for Secured Bank Loan
In theory, a secured bank loan should be quicker and a little bit easier to sort out than unsecured borrowing. The bank has the security of your assets, so it should also offer a lower rate and might offer a higher loan amount as well.
If you have assets then this can be a good choice. Yet, don’t expect it to be exactly easy to arrange. Banks usually aren’t the best option if you need to get hold of some money urgently and with little paperwork to be completed.
Poor Credit History? Get a No Credit Check Loan
This is a fast and easy type of small business loan. You are using an asset such as a vehicle of machinery as collateral. So, a no credit check loan can be sorted out pretty much instantly if you are in a hurry to get some cash flowing into the business.
It is a smart move when you have available assets but your credit history is poor. There is no need to jump through any hoops at the bank either, so if time is of the essence you will have fewer worries.
Want a Modern Approach? Peer to Peer Lending
This is a fairly modern approach to business borrowing that is now made available from a number of different internet sites. On the positive side, interest rates tend to be lower than with banks.
On the other hand, the lack of financial regulation in this sector of the industry might be off-putting for some people. In addition, it is sometimes necessary to take the loan out as an individual rather than in the name of the business.
A Slow Period of the Year? Look at Invoice Financing
Some businesses go through periodic slow periods when orders dry up and funds get tight. Invoice financing is a type of business loan that has been created to deal with this specific situation.
It is a way of borrowing against the money that you are due to collect from customers. Some firms that offer this facility will even take over the responsibility for collecting the money due to you on outstanding invoices.
Summary
There are now sensible borrowing method for small business with varying needs and situations. It is always worth taking some time to consider all of the available types of loan first of all.
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