Month: September 2022

Types of Loans for Your Small Business

Are you interested in a loan for your small business, but don’t know where to start? There are many different types of loans for your small business, such as credit cards, invoicing, and cash advances. The loan you choose will depend on what you need the loan for, and when you need the loan.

Here are the most popular types of business loans for small businesses, regardless of the industry you work in — from starting a photography company to opening up your own hotel, you can’t go wrong with these loans. Please keep in mind that the loan terms, qualifications, and rates will vary depending on the lender. 

Term Loans

What is a term loan?

A term loan is a business financing loan. You receive a large amount of cash right away and pay it, along with interest, over a predetermined period. Some online lenders offer up to $1 million and provide you with the funds within a faster time period than many banks. 

What are the pros of term loans?

    • Receive cash immediately for your small business
    • Normally allow you to borrow more funds than other loans and banks 
    • Receiving the funds is quicker if you use an online lender. Online lenders typically take 1-2 days, while banks take weeks to months. 

What are the cons of term loans?

    • Term loans may require you to guarantee an asset or business equipment as collateral that the lender can sell if payments are not made
    • Interest rates are normally higher than traditional bank loans 

What type of businesses are term loans best for?

Term loans are best for businesses that are interested in growing as soon as possible, and business owners that have a good credit line and a stable business they are sure will succeed with more funds.

SBA Loans

What is an SBA Loan?

An SBA loan is a loan administered by The Small Business Administration. Loans are offered by banks and lenders and typically offer longer repayment periods, depending on the industry you work in. The repayment period is normally between 7-25 years.

What are the pros of an SBA loan?

    • Low rates 
    • You can borrow up to $5 million
    • Longer repayment period 

What are the cons of SBA loans?

    • SBA loans are hard to qualify for
    • The application process is long and tedious 

What type of businesses are SBA loans best for?

SBA loans are best for businesses that would like to expand or refinance their existing debts. Additionally, those who are proficient as credit card holders and who are open to waiting a long period of time for their loan would be best for the SBA loan.

Business Lines of Credit

What is a business line of credit?

A business line of credit is funds that you have access to with a credit card. You pay interest only on the money that you have withdrawn with that credit card.

What are the pros of a business line of credit?

    • Flexibility
    • Normally, there isn’t a required collateral 

What types of businesses are business lines of credit best for?

Business lines of credit are best for businesses that operate only during a specific season, and businesses that have short-term financing needs, are managing cash flow, or have been hit with unexpected expenses. 

Equipment loans 

What is an equipment loan?

An equipment loan is a loan that will help you buy equipment for your business, such as a semi-truck, or welding machine. The loan’s term usually matches that of the expected life span of the equipment that was bought. Furhtemroe, the equipment normally serves as collateral for the equipment loans. For this reason, rates will vary.

What are the pros of an equipment loan?

    • You own the equipment you purchased and buy equity in it
    • If your line of credit and businesses expenses are stable, you will get competitive rates

What are the cons of equipment loans?

    • They may require a down payment
    • Finances might last longer than the equipment 

What types of businesses are equipment loans best for?

Equipment loans are best for businesses that want to buy equipment and own it themselves.

Invoice factoring 

What is invoice factoring?

If you are a business that uses an invoice payment method, you have learned that customers and clients will wait until the last day to pay their bills.  Invoice factoring allows you to receive the money they owe you as soon as possible. Essentially, an invoice factoring company buys the invoices off of your business, and clients and customers pay them. 

What are the pros of invoice factoring?

    • Get paid right away
    • It is easier to get approved for invoice factoring, unlike getting accepted for a loan 

What are the cons of invoice factoring?

    • It can be costly
    • You lose access to the invoices 

What types of businesses is invoice factoring best for?

Invoice factoring is best for businesses that have unpaid invoices and need the cash as soon as possible and businesses that have reliable customers that will pay the invoicing factoring company.

Invoice Financing 

What is invoice financing?

Invoice financing is when you use your unpaid invoices as collateral to get a cash advance.

What are the pros of invoice financing? 

    • Get cash fast 
    • Customers do not need to be notified about their invoice being financed 

What are the cons of invoice financing? 

    • Can be costly 
    • You still need to collect the invoice payment 

What types of businesses is invoice financing best for? 

Invoice financing is best for businesses that want cash quickly and businesses that still want control over invoices.

Merchant Cash Advance

What is a merchant cash advance?

A merchant cash advance is when you get a large amount of cash to finance your business. With a merchant cash advance, you may payments by withholding a percentage of your daily credit and debit sales or by daily or weekly withdrawals from a bank account. 

What are the pros of a merchant cash advance?

    • Immediate cash
    • Unsecured financing 

What are the cons of a merchant cash advance?

    • High borrowing costs 
    • Frequent payments lead to cash flow issues 

What types of businesses are merchant cash advances best for?

Merchant cash advances are best for businesses that have large and frequent credit card sales and businesses that can’t find business financing elsewhere. 

Personal Loan

What is a personal loan?

A personal loan is for startup businesses and requires credit score approval. 

What are the pros of personal loans?

    • Start-up companies and new businesses can qualify 
    • Receive funds fast 

What are the cons of personal loans?

    • High borrowing costs
    • Low borrowing amounts 
    •  If you fail to pay, your credit score will decline 

What types of businesses are personal loans best for?

Personal loans are best for new businesses and those who understand how credit score works to avoid damaging their credit score.

Business credit cards 

What is a business credit card?

A business credit card is a line of credit made specifically for businesses. Withdrawal and pay the card as needed. Ensure you are paying the minimum monthly payments and do not exceed its limit.

What are the pros of a business credit card?

    • Earn rewards and points 
    • No collateral is required

What are the cons of a business credit card?

    • High cost with rates that are expected to rise 
    • May have extra fees 

What types of businesses are business credit cards best for?

Business credit cards are best for business owners that have ongoing expenses. 

Microloan

What is a microloan?

A microloan is a small loan, typically no more than $50,000. They are offered by nonprofit organizations and mission-based lenders.

What are the pros of microloans?

    • Low cost
    • Consulting and training may come with the loan 

What are the cons of microloans? 

    • Small loan amounts 
    • You might need to meet stringent eligibility requirements 

What types of businesses are microloans best for?

Microloans are best for startup businesses that are at a disadvantage and businesses that only need a small number of funds 

The Pros and Cons of Online Invoicing and How it Works

Small businesses save time and get paid faster with online invoicing, or electronic invoicing. There are many reasons why businesses switch to a digital form of payment and there are many different payment forms to choose from. Though digital payments are the new cashier, there are both pros and cons to this payment method. It’s important to consider how online invoicing works and what the pros and cons are as it may not be the best payment method for the type of business you run.

As a business owner, you must find ways to make your business run more efficiently. For some, online payments may be a game-changer. They are convenient for customers and clients and lead to an increase in the efficiency of your business. 

Continue to read this article to learn more about the pros and cons of online invoicing, how it works, and if it will benefit your business.

How Do Online Invoices Work?

Online invoicing allows businesses to send invoices to their clients and customers electronically. Customers are sent an invoice with built-in payment options where they can pay for their invoice themselves. Online invoices are easier to document, keep track of, and provide businesses with payments in a quick manner. 

There is online invoicing software that provides you with a selection of invoices to choose from based on your business type. Many online invoice software allows you to edit the template so it best suits your business. Once you are content with the invoice template, you can incorporate it into your business as a method of payment. Depending on the invoice software, you can email the invoice directly to the client or customer. Some software, such as Transact, allows you to text the invoice directly to the client, and they are able to pay from there. 

Additionally, there is online invoicing software that comes with extra features that benefit the company. While some function as a method of payment, others also track and record expenses, send reminders, sort out paid and unpaid invoices, and offer a recurring billing system. 

What Are The Pros of Online Invoicing?

There are many pros of online invoicing for your business, especially in today’s day and age. Here are the pros of online invoicing:

    • Accounts receivable: Allow customers to purchase now and pay later. 
    • Quicker payments: Receive payments instantly 
    • Record keeping & Reminders: Keep track of all invoices and send reminders to customers/ clients regarding their bill
    • Time efficient: Saves your business time 

What Are The Cons of Online Invoicing?

There are very few cons of online invoicing, however, it’s important to consider the following as online invoicing may not benefit all businesses:

    • Fees: Some online invoicing software require a fee for their services 
    • Preference: Not everyone prefers online invoicing, especially the older generation that doesn’t know how to use technology. Some people will avoid your business when they are informed about online invoicing. Consider both in-person and online payments if you have found that customers prefer either or. 
    • Spam: Sending online invoicing directly to someone’s email may get lost in their spam folder, and will result in further issues. 
    • Hackers: If you invest in online invoicing software that sends invoices via email, you will run the risk of hackers accessing clients’ and customers’ personal billing information.

Online Invoicing Resources

Before jumping into the first online invoice software you discover, do your research and decide which one would best fit the needs of your business. A web design invoice template will look a lot different than a construction invoice template. Here is the best online invoice software to consider.

Transact Invoice 

Transact is free and is accounts receivable. It allows businesses to instantly send and collect custom invoices via SMS without the requirement of creating an account. It also has reminder and record-keeping integration. It is best for both small and large businesses. 

Zoho Invoice 

Zoho Invoice is free software that will be best for small businesses. Their invoices are customizable and clients and customers can set up recurring payments. 

Freshbooks

Freshbooks is online invoicing software that also integrates accounting. Businesses can custom their invoice design and send reminders to customers/clients. Freshbooks does have a monthly fee.