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Types of Loans Available


Commercial bank loans do not require entrepreneurs to transfer equity or control of the company. In general, banks prefer to make loans of more than $ 10,000. They like to see:

● Good credit

● Solid business plan

● Ability to pay the loan

● Collateral

Loan Funds

These programs usually provide loans to businesses located in specific communities or regions and offer them through different agencies. When you are looking for an application for a revolving loan, it is important to know that you will be working with your local bank or other loan agency for the main source of the money you will need. The revolving loan will close the monetary gap between the main lender and the total you need for your project.

Rankia offers more information about these loans, as well as the advantages or disadvantages they may have.

Micro loans

If you find that you have not been able to find a bank loan to start your business, you may be lucky through a micro loan program. Usually, micro loan programs offer loans valued between $5,000 to $50,000 to small businesses, as well as technical assistance to help with your business.

Other Sources of Financing:

A Line of Credit

It is an arrangement with your bank where they lend you credit up to an agreed limit. It is a type of loan that does not provide a specific sum, as usual with traditional loans. The credit line works more like a credit card, in the sense that you borrow from your credit line when you are in need of money to cover short-term expenses.

Home equity loans

They serve as a second mortgage in your home provided by a lender, which allows you to borrow based on the equity (market value) of your property. This may be a cost effective alternative, compared to the other loans, because interest is usually lower. However, it is important to take into consideration that in this case you would be risking your property to obtain funds.

Equipment Lease

It gives you access to different types of equipment (computers, printers, cars, trucks, etc.) without binding your cash or lines of credit. Although it doesn't bring cash to your business, leasing can reduce the amount of cash that, otherwise, you would have to use to start your business. Equipment leasing can be provided by banks, loan companies or equipment vendors.

Cash Advances of Credit Cards

They are an easy and fast way to get access to cash, but if it is used for long-term financing it ends up being more expensive. Typically, interest rates on credit cards are much higher than other types of funds have. In other words, you will most likely end up paying much more in the long run.

Financial Factoring

If your business has long-term accounts receivable, working with a factoring company can be a good alternative to waiting to collect payments. Factoring companies buy accounts receivable at a discounted rate. This allows your company to get cash quickly, which positively impacts the flow of funds.

General Aid for Small Businesses

The government does not provide free monetary aid to small businesses that are “startups” or are in the process of expansion. BE VERY CAREFUL with the ads that promote “money without repayment for your business”

Nonprofit Business Grants: Entrepreneurs with nonprofit businesses or for social impact purposes (people who use innovative business applications to solve a social need - example: TOMS) can benefit from ...

Venture Capital and Investment Funds

The terms "Venture Capital" and "Angel Investor" are often confused. Both receive equity (shares in a company that is not publicly traded) for investing in private companies, but there are several differences.

Angel investors can be an individual or a group of individuals who form an ángel angel fund ’, a tool with which they invest their own money in one or more businesses. They may be more willing to invest in companies that are in the early stages. Usually, the amounts they invest are less than what you would see if it were an investment by a venture capitalist.

Venture Capital funds are managed through venture capital firms that are formed by professional investors. The funds enter through different sources, including individual investors and corporations, among others. The types of businesses in which they invest are small and medium enterprises with strong growth potential. Typically, investments are characterized as high risk / high return opportunities.