Different types of Business Loans in USA - PowerPoint PPT Presentation

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Different types of Business Loans in USA

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Are you confused over Business loan types? Here, we will let you go through the varied types of business loans. After all, we want you to make the right decision. – PowerPoint PPT presentation

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Date added: 18 June 2019
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Title: Different types of Business Loans in USA


1
Different types of Business Loans in USA
2
Bank Term Loans
  • Banks issue bank terms loans for a specific
    amount, and have long-term repayment plans.
  • These loans have both fixed and floating interest
    rate.
  • A term loan is appropriate for small business
    owners with sound financial statement, and the
    ability to repay over a specified repayment
    schedule.
  • Terms loans are usually used to purchase
    equipment and fulfill working capital needs.  

3
Types of term loans
  • Reflecting the lifespan of a loan, term loans
    have several varieties
  • Short-term loan Offered for a short period -
    less than a year, and is paid in weekly or
    monthly installments, through a loan that runs up
    to 18 months can be referred as a short-term
    loan.
  • Intermediate-term loan The loan runs typically
    between one to three years and paid in monthly
    installments.
  • Long-term loans Long-term loans last for three
    to 25 years, but may last for 30 years in some
    cases. The long term loan requires monthly or
    quarterly payments from the companys profits.

4
Bank Line of Credit
  • A line of credit is an unsecured loan that a
    customer can borrow from a financial institution
    usually a bank - and use for any purpose, as
    needed.
  • Customer will need a good credit score, typically
    credit score of 680 or higher, and have a decent
    history of repaying debts promptly.
  • Line of Credit (LOC) may be cheaper than a credit
    card advance and more flexible than a personal
    loan.
  • LOC can be the best help when you need money
    incrementally.
  • It can be used for home renovation projects, for
    a great vacation, medical bills, big-ticket
    purchase, childs fees.

5
How does LOC work?
  • You can access funds from the line of credit,
    whenever you need.
  • In the line of credit, unlike a loan, you dont
    have to get a lump sum amount upfront.
  • You have variable access to a line of credit as
    long as you dont exceed credit limit or maximum
    amount as you need it.
  • Accessible through electronic transfer and checks.

6
Equipment Loans
  • Issued to purchase business equipment.
  • The best financing option to help small
    businesses get the capital to acquire, replace,
    repair, and upgrade various types of machinery to
    produce, manufacture process their products.
  • Used to buy
  • medical and dental machinery for hospitals
  • cookware, oven, table and chair, and other
    catering supplies for restaurants
  • monitor, printer, scanner for offices
  • specialized machinery, furniture, a vehicle for
    transportation, etc. for efficient and productive
    operations.
  • One can pay 100 of the cost of the equipment
    used for his/her business.
  • Depends on the total value of the equipment you
    are purchasing.

7
Invoice Financing
  • Invoice financing allows you to borrow money
    against unpaid invoices i.e., against the amount
    due from customers.
  • Lenders provide companies with cash
    collateralized by accounts receivable.
  • Can get up to 85 of the value of your invoice.
  • A great way to invest capital into your business
    when customers are taking a long time to pay the
    bills.
  • Helps to improve cash flow, paying employees and
    suppliers, and covering other expenses.
  • There is less risk involved in invoice financing
    from a lenders perspective.
  • Unlike a line of credit which may be unsecured,
    invoices act as collateral for invoice financing.
  • Although it doesnt eliminate all risk, customer
    may not pay the bill. 

8
Purchase Order Financing
  • Financial assistance for businesses that lack the
    cash flow to complete customer orders.
  • Many small businesses have cash flow problem to
    complete a purchase order, and thats why it is
    needed the most.
  • Pays the supplier of your company to deliver
    goods to the customers.
  • When the customers pay purchase order financing
    company then makes money by charging your company
    various fees.
  • Deducts its fees from collected invoice and
    returns the remaining amount to you.
  • If you have a new business and get large orders
    at once, you might not have money to deliver
    these orders to your customers.
  • Makes sure you have enough fund to fulfill the
    orders.    

9
Rollover for Business Start-ups
  • A rollover for business startups allows you to
    use funds from your retirement account to invest
    in your business.
  • With rollover for a business startup (ROBS), you
    dont pay early withdrawal penalty or taxes.
  • A ROBS is neither a business loan nor a 401(k)
    loan, so there is no debt or interest to repay.

10
How rollover for business works?
  • ROBS gives you access to your retirement funds to
    use it to fund
  • a new business
  • buy an existing business
  • recapitalize your business without having to
    borrow or cash it.
  • A ROBS is not a withdrawal from or a loan against
    your retirement fund.
  • When you use it, your retirement account buys a
    share of your business.

11
Hard Money Loans
  • A hard money loan is a specific type of
    asset-based loan option for real estate investors
    when they cant get a loan from a traditional
    mortgage lender.
  • A hard asset and collateral secure a hard money
    loan.
  • Many new businesses are turning to hard money
    loan because they are easier to achieve than
    traditional loans.
  • Expensive and hard to pay.

12
How hard money loans work?
  • Issued for a short term typically 6 to 24
    months.
  • You can close it as soon as you can.
  • Allows real estate developer and investor to
    purchase new properties and do more transactions
    with less money, which will get them a higher
    return.   

13
Non-Profit Business Loan
  • These lenders cater to small business in their
    community that can potentially impact the economy
    by creating jobs.
  • Non-profit lenders often offer to business owners
    unable to access capital from traditional lenders
    for nominal interest rates.
  • Their objective is to support the economic
    development of the community.
  • Non-profit lenders develop a strong relationship
    with small business owners they lend to.
  • They help borrowers navigate particular
    challenges and provide them fund before it is too
    late.

14
Advantage of Short-term Loans
  • Shorter time for incurring interest
  • Quick funding time
  • Easier to acquire

15
Merchant Cash Advance
  • A merchant cash advance is a cash advance but
    operates like a loan.
  • It is a lump sum payment that a finance company
    provides you in exchange for a percentage of your
    credit card and/or debit card sales.
  • Merchant cash advances (MCA) are approved quickly
    and easily with no collateral, even if you dont
    have a good credit score.
  • Have higher fees than traditional loans.
  • Merchant advance companies are not bound by usury
    law and operate in mostly unregulated market.
  • MCA can help with inventory purchase, debt
    payments, working capital, and other unexpected
    payment. 

16
Online Business Lines of Credit
  • A business line of credit is like a small
    business credit card.
  • It gives you access to a credit limit when you
    need capital.
  • Unlike a traditional business loan, you have
    variable access to a business line of credit as
    long as you dont access the limit.
  • You can access the fund as per your need and
    repay the only amount you get, plus the interest
    rate.
  • You can draw on a business line of credit to
    tackle cash flow gap, get more working capital,
    and other unexpected payment.     
  • With a business line of credit, you can typically
    borrow from 10,00 to over 1 million in funding.
  • Repayment term generally ranges between 6 months
    to 5 years, depending on your credit worthiness,
    for 7 to 25 interest rate.

17
Benefits of a Business Line of Credit (BLOC)
  • Poor credit is acceptable
  • Only pay interest on fund accessed
  • Suitable for a wide range of business purposes

18
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