Methods of Securing a Business Loan Online
Starting or running a small business is not an easy task. One of the major challenges that an entrepreneur faces is the lack of adequate capital for initial set-up. Bank loans are instantly accessible only if you have a good credit score or a good business history. Before applying for a small business loan online, it is imperative to explore the various types and sources of loans you can avail as per your business requirements and as per your feasibility. Small business owners can avail both secured as well as unsecured loans.
Here are some beneficial methods that can help you learn how to secure a business loan quickly and in a less intricate manner.
Factoring enables you to raise capital by selling your accounts receivable. It is an alternative to asset-based lending and provides capital to businesses whenever there is a requirement. You can use factoring for starting your business because unlike banks factors consider the financial solidity of a business's customers and not the creditworthiness of a business owner.
Trade credit method helps you purchase raw material and other necessary equipment for your business on credit from various suppliers. You can get credit for a span of 3 to 6 months in the form of short-term financing. You can use this method to obtain finance based on the size of your business. Once, there is an increase in the production and sales of products, there is automatic increase in the volume of purchases, and hence you can avail more trade credit.
Cash Credit and Bank Overdraft
Cash credit is useful for businesses that require to meet short-term financial requirements. It helps you get advance cash from commercial banks from time to time within a specified limit. You can adopt this method against your stocked assets or promissory notes bearing a second signature, or other saleable products like Government bonds. Overdraft is a temporary arrangement with the bank that permits you to overdraw up to a certain limit from your current deposit bank account. You can use the overdraft method against your securities. However, the interest rate charged on cash credit and overdraft is relatively high as compared to the rate of interest on bank deposits.
Loans from Commercial Banks
Commercial banks can provide you medium-term finance against the security of your assets. You do not have go through any legal procedure for obtaining finance through this method except the mortgage on the assets. This method of funding is mainly achieved for renovating your firm's assets.
Loans from Financial Institutions
Financial institutions can provide you with medium-term and long-term loans. Renowned financial institutions grant loans for a maximum period of 25 years against approved projects or schemes. However, the sanctioned loans should be covered by securities through stocks, shares or mortgage of your firm's properties.
The emergence of online market places have made it easy for small business owners to get funding even with bad credit score or poor business history. Biz2Credit is one such marketplace that has helped thousands of small business owners in getting funds for their businesses. The online loan application process of Biz2Credit is also easy and hassle-free and an entrepreneur is provided with free loan consultation for understanding the nitty-gritties of various loans. Hence, securing a business loan from an online market place can be a viable option for you if your credit score or business history is not up to the mark.