Debt financing is often a workable option for small businesses in need of capital, but with so many different types of debt available, knowing which type would best match your particular circumstances is crucial for making an informed decision.

While some of the most common types of business loans are listed below, a small business consultant in Miami can talk you through your options in more detail:

SBA loans

There are a range of loan programs offered by The Small Business Administration, or SBA, each of which are designed to help small businesses gain access to capital.

Although they typically offer interest rates that are lower than traditional bank loans, along with repayment terms that are more flexible, the lengthy application process involved can be off-putting. In some instances, collateral may also be required, which could prove problematic for those businesses without ready assets.

Business line of credit

This credit facility enables businesses to borrow a certain amount of funds up to a limit that has been pre-approved, as needed. For business struggling to manage their cashflow, this degree of flexibility is appealing.

That said, these lines of credit tend to have higher rates of interest attached than loans that are fixed-term, and if not managed carefully, their revolving nature can make them risky in terms of overspending.

Invoice factoring

Able to provide you with an immediate source of cash, invoice factoring is when your outstanding invoices are sold to a factoring company at a discounted rate, but it does come with a fee.

While this method can provide you with funds quickly, the fees that the factoring companies charge can make it costly.

Term loans

With an interest rate that’s predetermined and a schedule for repayment, these fixed-term loans are useful for making significant purchases, such as real estate or equipment.

Although term loans can offer payment predictability, they typically require collateral and can take a long time to obtain.

Equipment financing

In the form of a lease or term loan, this type of financing is designed specifically for the purchasing of equipment, and can be a good option for a business needing to buy new equipment.

However, should the equipment lose value, this can be an issue as it is often used as collateral.

Commercial real estate loans

Used specifically for businesses buying or refinancing commercial real estate, for businesses with property, these can be a sound investment.

But as they’re subject to fluctuations in interest rates and typically need a hefty down payment, they’re aren’t suitable for every business.

Merchant cash advances

As a quick way to get your hands on funds, merchant cash advances can be useful, and are when a portion of your future credit card sales are sold to a lender in return for a cash lump sum.

Often coming with high interest rates however, they can become expensive.

Microloans

These short term, small loans are usually offered to businesses by microlenders or nonprofits, and for small amounts of capital, they can be a sound option.

But watch out for the high rates of interest often attached, and limited availability of funding.

To find out more about any of the loan options outlined above, schedule a consultation with a company offering financial consulting in Coral Springs. These highly knowledgeable and experienced experts will be able to help you understand your debt and learn how best to manage it, as well as provide you with invaluable advice and guidance about your business finances overall.