Which Type of Business Credit Is Right for Me?

Every small business is unique, as are the funds available to it—so how do you choose the right credit option to set your business up for success? First, you have to understand what each offer means and how it can be used. Read about four popular types of business credit below, or watch this quick video.

SBA Loan

First is the SBA Loan (Small Business Association loan). SBA loans are guaranteed by the SBA, and they often come with lower interest rates and longer repayment terms. The eligibility requirements are a bit more stringent than the other loans discussed in the video above.

Term Loan

Another option is a term loan. You receive a set amount of funds with a fixed interest rate from a lender that you pay back over a designated period of time.

Invoice Factoring

Then there is invoice factoring. Invoice factoring allows you to sell outstanding invoices to a factoring company, which then gives you a cash advance for the total amount. The factoring company then collects on the invoice, plus fees.

Line of Credit

Lastly, there is a business line of credit. Similar to a personal credit card, once you are approved, you have access to the amount you qualified for on a rolling basis.

Once you know what type of credit is right for you, start preparing by reading these four things you should know before applying for a small business loan.