As a self-employed person or small business owner, you often need outside capital to finance your business idea in order to realize it and start your company. A loan for small business owners is often associated with certain requirements and questions. We will show you which requirements you must meet and which options are available to you for business financing .
What is a small business loan?
Small business loans are loans specifically designed for small businesses. You can choose from a variety of options, such as personal loans, bank loans or microloans, to help you grow your business.
Types of Loans for Small Businesses
Lending to small businesses often involves a number of hurdles. Low or missing collateral, uncertain income levels or lenders’ concerns about the industry, business model or financial situation of the company can make it difficult to obtain capital.
To help you get started, we’ve rounded up different types of small business loans, each with their own advantages and disadvantages. It’s important to do your research carefully before making a selection.
bank loans
A bank loan is the classic form of external financing. These loans can be used for a variety of purposes, such as purchasing equipment or for your working capital. Bank loans usually have a lower interest rate than other types of loans. However, mexico email list you also tend to have shorter repayment periods. You often have to provide collateral and you should note that the application process can be lengthy.
start-up loan
If you want to finance your start-up, you should consider the option of start-up loans. These are either granted by banks or as subsidized loans by institutions such as the Kreditanstalt für Wiederaufbau (KfW). However, such funding must be related to and serve the purpose of starting your business .
current account credit
A current account loan (also known as a working capital loan) can be a short-term solution for covering your capital requirements. Similar to an overdraft facility (authorized account overdraft) in the private sector, b2c phone list a credit limit is set up up to which the loan can be used flexibly. Such working capital loans are suitable, for example, the line is adapted to support for balancing out short-term fluctuations and are usually granted by banks.
investment loans
Investment loans (also known as equipment loans) are typically used to finance the purchase of new equipment. Your equipment itself serves as collateral for the loan, so you usually don’t need to provide additional collateral. These loans tend to have a shorter repayment period than other types of loans and interest rates can be higher. However, an equipment loan can be a good option if you don’t have the money to buy your equipment outright.
microcredits
The German Microcredit Fund enables the granting of microcredits of up to 25,000 euros to small and medium-sized companies. Such a microcredit can be applied for at a microcredit institution of your choice. The loan can be granted in stages. The loan term is a maximum of 48 months with an interest rate of 8.1 percent per year.
loans through credit unions
A credit union is similar to a bank loan, but loans are not offered through the bank. A credit union is a nonprofit organization that is usually owned by its members. Interest rates on loans are often lower than bank loans.
invoice financing
This type of small business loan allows you to borrow against outstanding invoices. Your lender pays you a percentage of the invoice value up front, and you pay back the loan plus interest when you receive payment from your clients. This can be a good option if you need help with your cash flow or if you work with clients who take a long time to pay their invoices.
peer-to-peer lending
A peer-to-peer loan (also known as crowdlending) is financed by investors rather than traditional lenders. Private investors lend money to the company, which must be repaid with interest within a certain period of time. These loans are usually used for small business purposes, such as start-up costs or purchasing equipment.
private loans
Typically, personal loans are used for personal purposes, such as debt consolidation. However, in some cases, lenders will allow you to use a personal loan for business purposes. However, these personal loans often have a higher interest rate than other types of loans.