Understanding the Main Types of Business Loans

Are you looking for financial assistance to drive your business's expansion or to cover your daily operational expenses? You've come to the right place.

At Union Commercial Capital, we help small businesses just like yours to get the funding they need to meet their business needs. Whether you are growing your business or keeping up with your business’s needs, having the right financing options can make all the difference. However, you may not be sure which type of business loan is right for you.

In this guide, we dive into four common types of business loans: term loans, lines of credit, equipment financing, and merchant cash advances. By exploring the features, benefits, and considerations of these business loan types, you’ll be better equipped to choose the most suitable option for your business.

1. Term Loans

Term loans are a traditional and widely used method of business financing. They consist of borrowing a set amount from a lender and repaying it over a specified time frame, usually with fixed monthly installments.

These loans may be either secured or unsecured, with repayment periods spanning from a few months to several years. Term loans are well-suited for financing long-term investments like business growth, equipment acquisitions, or real estate purchases. They offer businesses an upfront lump sum and predictable repayment plans, facilitating improved financial planning and budgeting.

2. Lines of Credit

Lines of credit offer businesses flexible funding options, much like a credit card. With a set credit limit, businesses can borrow and repay repeatedly as required, incurring interest only on the amount they use.

Lines of credit may be secured or unsecured and are frequently revolving, meaning the credit limit is restored as the borrowed funds are repaid. This financing option is ideal for handling short-term cash flow requirements, addressing unforeseen expenses, or taking advantage of immediate opportunities. It provides businesses with the flexibility to access funds as needed, helping them avoid borrowing more than necessary.

3. Equipment Financing

Equipment financing is tailored to assist businesses in obtaining essential machinery, tools, or technology to enhance their operations. Instead of paying a large sum upfront, businesses can obtain equipment loans that enable them to distribute the cost over a set timeframe.

The equipment acts as collateral for the loan, providing a secured financing option. Equipment financing allows businesses to obtain necessary assets without depleting their cash reserves or affecting cash flow. This is especially advantageous for industries where equipment is crucial, like construction, manufacturing, healthcare, and transportation.

4. Merchant Cash Advances

Merchant cash advances offer businesses a lump sum payment in return for a portion of their future credit or debit card sales. This financing option is ideal for businesses with steady card-based income, like retail stores or restaurants.

Merchant cash advances differ from traditional loans because they don't have set repayment terms. Instead, a percentage of daily sales is automatically deducted until the advance is completely repaid. Although merchant cash advances provide quick access to funds and flexible repayment options, they typically have higher fees and interest rates, making them a costlier financing choice.

Here's How Union Commercial Capital Can Help

Union Commercial Capital is a trusted platform offering access to the four primary types of business loans. With a broad array of financing options, they meet the diverse requirements of businesses in different industries.

Whether you need a lump sum for long-term investments, a flexible line of credit for short-term expenses, financing to acquire essential equipment, or funds based on your card sales, Union Commercial Capital has you covered.

With Union Commercial Capital, you can confidently navigate the world of business lending and find the loan type that suits your specific requirements.

The Bottom Line

Grasping the various types of business loans enables small business owners like you to make knowledgeable choices concerning their financing needs. Term loans, lines of credit, equipment financing, and merchant cash advances each fulfill distinct purposes and address specific business demands.

By thoroughly evaluating your financial requirements, taking into account repayment terms, interest rates, and eligibility criteria, you can select the loan type that best matches your business objectives and paves the way to success.

Remember to consult with lenders, financial advisors, or industry experts to make the most suitable financing decisions for your business. Start the process of attaining a business loan by applying at Union Commercial Capital today.