Before you can get a loan you need to know what type of loan do you need and want. The types of loans are mostly differentiated by the ways you can repay them and the amount of time you have to repay it.

Think about your revenue stream and decide best on this. It means that sometimes loans with bigger rates can be better for you if you have plans to get a large return on investment you’ve made.

Here are a few types of loans to think about.

Term loans

 

Term loans are basically ordinary loans, but the only deal that you make with the bank is about the time you have to return the money. This means that the interest rate isn’t fixed and it varies based on a lot of things, like the currency you’re using and the amount you’ve borrowed.

Have in mind that this also means you can’t repay the loan any faster than you’ve decided on. You’re going to have to repay in equal installment usually on the monthly bases.

 Working capital loans

 

Working capital loans are there to help businesses run their operation on day to day bases. This is mostly done by using the debt of your clients to finance the loan. You get the money right away and those who owe pay back to the bank instead of you.

This way you don’t need to deal with delays and instead of interest you just pay a percentage of the amount you’re already being owed by the clients you encounter on during day to day operations. These loans are very important for the small businesses that don’t have that much money saved.

Line of credit

 

Line of credit is somewhat similar to working capital loans because it’s used to finance running a business and paying for the daily expenses of the business. However, it works in different ways. You don’t borrow a fixed amount of money, but have a line of credit from which you can take as much as you need and you only repay what you’ve borrowed.

This type of loan is best suited the businesses that don’t have a fixed monthly revenue. Retail businesses would benefit from this because no one really knows what can cause a bad month or a bad quarter.

 

What kind of loan is best suited to your business and why?