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Whether the head of a company is a small business owner, midsize business owner, or big business owner, it’s very likely they all have one thing in common – at one time or another they have probably needed a loan. Many entrepreneurs acquire a startup loan to begin the process of creating a business. During the operation of a business, it isn’t at all uncommon to run into a bit of a “funding issue” here and there – so loans come in handy for already-established businesses, as well.

There are countless types of loans that business owners may turn to, including the following:

• Merchant cash advances
• Micro-loans
• Commercial real estate loans
• Invoice financing or invoice factoring
• Equipment loans
• Business line of credit
• SBA loans and more

One kind of loan business owners may turn to is that of a term loan. There are, however, different types of term loans. Here we will examine a term loan in general and then look at the various types.

Term Loans – What Are They?

In exchange for pre-specified borrowing terms, a set amount of cash is provided to a borrower courtesy of a term loan. Very often, if a business has a sound financial statement and is already established, term loans are far more likely to be granted. The business owner/borrower agrees to specific terms (i.e., fixed interest rate, a flowing interest rate, repayment schedule, etc.) in exchange for a predetermined amount of cash. To reduce the total cost of the loan as well as the payment amounts, a considerable down payment is sometimes required.

Term Loan Types

There are three types of term loans. The payback time of the loan is more or less reflected in the name:

• Long-Term Loans – quarterly or monthly payments are required from either cash flow or profits, and collateral in the form of company assets is also required. These types of term loans can run from three years up to as many as 25 years. There will be a limit to financial commitments the business may take on including principles’ salaries, other debts, dividends, etc. To be earmarked for loan payment, the lender may specify the borrowing business is to set aside a predetermined amount of profit.
• Intermediate-Term Loans – paid back from the cash flow of the borrowing company, these loans are repaid in monthly installments and, more times than not, apply to a run of 1 to 3 years.
• Short-Term Loans – if the borrowing business can’t qualify for a line of credit, these kinds of loans may be offered. Short-term loans can apply to a loan up to and in excess of 18 months, but they are usually paid off in less than a year.

Contact VIP Capital Funding For a Small Business Loan

When you need a small business loan, before you go elsewhere, turn to us. We are VIP Capital Funding. We offer early prepayment discounts on flexible business loans. If you need funding for day-to-day operational expenses and more, apply for a small business loan with us.

For early prepayment discounts, no upfront fees, a tax deductible interest rate, and more, speak to one of our representatives at 800-735-7754 or email us at [email protected].

You can also hit the “Apply Now” tab on our homepage and use our convenient online form to get started.

Do you own a small business? Could you use a little cash now and then to cover payroll, day-to-day operational expenses, expansion, marketing, inventory, and more? We all need help here and there. But what can you do?

From hiring staff and buying goods to renting production or office space, you need money to run a small business. Unless some benevolent relative left you a nest egg or you’re independently wealthy, some funding will likely be necessary along the way.

What kind of assistance is there for funding small business owners when they need it? Let’s find out.

Product Presales

You’re less likely to have a crowded warehouse and/or make too many products if you pre-sell your products. It’s a great way to make money if your business is based on a single product and its sales.

Contests

It’s true. For entrepreneurs and businesses, financing and monetary rewards are sometimes offered by organizations through contests.

Loans from Family and Friends

There are numerous pros and cons, and it can be tricky, taking money from family and friends. Before using a loan from these people, make sure you scrutinize the situation closely and have everything written and signed.

Financing From a Vendor

With one or more of your vendors, you may choose to negotiate longer payment terms if the sale of your product determines whether or not you can pay your bills. Before implementing penalties and late fees, 30 days may be given for payment on invoices by some vendors.

Finance Purchase Orders

So a business can get the materials needed urgently, an advance is essentially extended by an organization that finances purchase orders. Once the goods are sold, the money is paid back.

Personal Financing

Keep in mind that unfortunate consequences may arise, but if you want to take out a second mortgage, or are willing to refinance your home – or if you have significant savings – personal financing may be an option.

Micro-loans

For individuals who might not ordinarily qualify for a bank loan on a traditional level, some institutions grant micro-loans. Note: Nonprofit organizations are frequently the benefactor in this instance.

SBA (Small Business Administration)

So the small business sector can grow and succeed, a vested interest has been shown by the United States government. To help entrepreneurs get started, numerous small business loan types are offered by the SBA.

Venture Capitalists And Angel Investors

Angel investors and venture capitalists are somewhat similar. If an up-and-coming, young business has a high potential for monetary returns and growth, venture capitalists and angel investors may want to invest in them.

In exchange for their investment, a share of equity may be asked for by venture capitalists. In the direction of the company, however, they may also want to have a voice.

Always on the lookout for the next great business investments, angel investors are different from other funding option types. Angel investors have funded some of the biggest companies today including Yahoo and Google. Some share of company equity will likely be required if you take money from an angel investor.

Crowdfunding

With the general public, many entrepreneurs, inventors, etc., especially over the last couple of years, have created crowdfunding sites for the funds needed. Some of these include Fundable and Fundly, Rocket Hub, Indiegogo, and Kickstarter. Your goals and needs will help to determine the right platform for you.

Alternate Sources for Loans

Lenders such as these fall just outside the perimeters of government institutions or banks. Make sure if you’re doing business with one of these alternate lenders, they are legitimate. Be sure to investigate all of the conditions and terms.

Need Funding for Your Small Business? Contact VIP Capital Funding

Turn to VIP Capital Funding when you need small business funding. We offer early prepayment discounts on flexible business loans. With minimal paperwork, we can help to facilitate substantial amounts of working capital. When you need help funding your small business, before you turn to someone else, confer with us.

For early prepayment discounts, no upfront fees, a tax deductible interest rate, and more, speak to one of our representatives at 800-735-7754 or email us at [email protected].

You can also hit the “Apply Now” tab on our homepage and use our convenient online form to get started.

Are you a business owner or are you considering starting your own business? At one time or another, more often than not, business owners need loans. While there are numerous types of funding available, one method is through term loans. Here, we’ll take a look at term loans, what they are, types of term loans, and more.

First things first – what’s a term loan? In exchange for specific borrowing terms, a lump sum of cash is provided to a borrower through a term loan. Frequently, if a business has a sound financial statement and is already established, term loans are used. The borrower agrees to certain terms in exchange for a specified amount of cash: i.e., a flowing interest rate, fixed interest rate, repayment schedule, etc. To reduce the total cost of the loan and reduce the payment amounts, substantial down payments are sometimes required.

Term Loan Types

There are several varieties of term loans. The lifespan of the loan is basically reflected in the name:

• Long-Term Loans – From either cash flow or profits, quarterly or monthly payments are required and collateral in the form of company assets is required as well. These can run from three years up to as much as 25 years. Any other financial commitments the business may take on will be limited including principles’ salaries, dividends, other debts, etc. Specifically for loan payment, the lender may require the business to set aside a precise amount of profit.

• Intermediate-Term Loans – From the cash flow of a company, these loans are paid in monthly installments and generally apply to a time span of 1 to 3 years.

• Short-Term Loans – If a business doesn’t qualify for a line of credit, these kinds of loans are usually offered. While they can apply to a loan up to and in excess of 18 months, repayment terms ordinarily run for less than a year.

Term Loans – Why Would a Business Get One?

Typically paid off between one year and 25 years, a term loan is frequently used for working capital, real estate, or equipment. A small business, in order to purchase fixed assets, often uses term loan cash. Example: For a business needing a new building or equipment for its production process.

In some cases, from month to month, a business will borrow the cash they need. Many banks, in order to help companies in this manner, have established term loan programs.

When You Need a Small Business Loan, Turn to  VIP Capital Funding

We are VIP Capital Funding. With our unrivaled business approach and working capital, you stand to gain a competitive advantage.

Need a small business loan? Turn to VIP Capital Funding. We offer early prepayment discounts on flexible business loans. If you need funding for payroll, day-to-day operational expenses, expansion, marketing, inventory, etc., apply for a business loan with us.

Check out our reviews to see how pleased our past clients are with our services.

For no upfront fees, a tax deductible interest rate, early prepayment discounts, and more, speak to one of our representatives at 800-735-7754 or email us at [email protected].

You can also hit the “Apply Now” tab on our homepage and use our convenient online form to get started.

Companies that provide cleaning services or other building services sometimes have a low entrance barrier. However, maintaining business operations involves frequent investments in your company, including bulk purchases of cleaning supplies, attracting new clients, and routine upgrades to cleaning tools like vacuums and industrial carpet steamers. While you wait for payments from clients or make payroll, you could need to fill cash flow gaps. Your cleaning service business may benefit from financing. Learn more about the different types of loans for cleaning business that help you acquire cleaning supplies or equipment or manage your financial flow.

Business Line of Credit

You have access to flexible, revolving funds through a business line of credit whenever you require them for your cleaning company. With a line of credit, you can take out as much money as you need, pay off the balance, and then have more money added to the line so you can use it again. A line of credit is typically used by cleaning companies to pay for upfront supply expenses or to bridge the gap in cash flow in between bills.

Short-Term Business Loan

Numerous online lenders provide quick business financing for startups like cleaning services. This kind of financing enables a business to borrow cash and repay it quickly, frequently resulting in a lower total dollar cost than a loan with a longer term. Terms range from three months to three years. A short-term business loan from an internet lender can be obtained much more quickly than a standard loan from a bank. Normally, the applicant can submit an application in a few minutes and receive funding within a few days. Many cleaning companies will take out a short-term business loan to fund marketing or advertising initiatives or to buy cleaning products in bulk at a discount.

Equipment Funding

Another approach to pay for the purchase of business equipment is through equipment financing (besides just using a loan or line of credit). Equipment for a firm can be any physical object needed in daily operations. This could be a vacuum cleaner, a professional rug cleaner, or the van that a cleaning service company uses to commute to client appointments. Many cleaning firms use equipment loans to expand their collection of business equipment without using up their cash reserves.

Bank Loan

The type of funding you are probably most familiar with as a business owner is a typical bank loan. In general, collateral is needed to receive a bank loan, and the application procedure can take several weeks. The loan term can range from two to twenty years. Even though bank loans’ interest rates can be alluring, many cleaning companies might have trouble being approved and discover that the application process is too time-consuming for their cash flow requirements.

SBA Loan

Although the Small Business Administration does not lend money directly, it does so through partner banks and credit unions. However, in some cases, the SBA Loan Guarantee Program will allow a borrower to qualify even if they do not otherwise meet the stricter requirements set forth by the bank. This can be an option for your business if your cleaning company is a well-established enterprise with a few years under its belt and your personal credit score is higher than 680.

Whether a company is just getting started or an established corporation, it relies on borrowed capital to run its operations. Business entities are presented with a wider array of financing options as compared to individuals which can make business borrowing much more complex. If you are looking for suitable financing for your business operations, find out more about cash flow based lending and how it can support your company.

Cash Flow Lending

Cash flow lending enables businesses to borrow money based on their projected future cash flows. This financing option involves a loan that is granted by the lender and is backed by the borrower’s past and future cash flows. By definition, cash flow lending is when a business borrows money from its projected revenues which they anticipate on receiving in the future. This type of lending also reviews the borrower’s credit ratings to determine their creditworthiness.

For instance, a company that intends to sustain its payroll obligations can utilize cash flow lending to pay its staff and repay the loan along with its interests on the generated revenues on a future date. No collaterals are needed on this type of financing but a portion of the cash flows are usually secured.

Cash Flow Underwriting

The underwriting of cash flow loans involves lenders examining future company incomes, its enterprise value, and its credit rating. This option is favored by companies as it is much faster to process without the need for any collaterals. Cash flow based loans are often underwritten by financial institutions through the use of a company’s earnings before taxes, interest, amortization, and depreciation, along with a credit multiplier.

Cash flow based lending lets lenders account for any risk brought on by economic and sector cycles. As many companies will see a decline in their company’s earnings before taxes, interest, amortization, and depreciation during an economic downturn, the risk multiplier used by the financial institution will simultaneously reduce. These two declining numbers combine to lower the available credit capacity for a company or increase interest rates if it has been stated as part of the criteria.

Cash Flow Suitability

Cash flow loans are more suitable for businesses that can keep high margins or are lacking enough hard assets that can be put up as collaterals. Business that meet these qualities can include marketing firms, service companies, and producers of low-margin products. These loans typically charge interest rates  that are relatively much higher as compared to other alternatives as they compensate for the non-requirement of a collateral which can easily be obtained by the lending institution in case of a payment default.

Business Loans Options

As businesses have a wider variety of loan options, you can carefully look through the pool of financing choices you have to ensure you pick the one that best meets your business needs. Whether you are running a startup or a mega organization, the key is to borrow something that is within your financial means. This will enable you to maintain steady payments month after month so as to sustain business growth.

If you are looking to expand your business and require financing, a loan may be essential to help kickstart your plan. You may not have a firm grasp on the financial growth of your business as well as its objectives, but you must quickly select a loan term that best matches your business needs. Before you derive with a decision, here’s what you need to know about short vs. long-term business loans and how to decide.

Short-Term Business Loans

Based on its name, a short-term business loan has a shorter repayment period which is usually up to a over a year. The benefit of a short-term cash loan is that it offers business owners with immediate liquidity for urgent needs that can include re-paying suppliers, stockpiling essential inventory goods, and filling a seasonal cash flow. Most often than not, business loans need some form of collateral to guarantee that you can pay your vendor adequately if monetisation fails. There is no collateral needed for short-term business loans and they require lesser paperwork.

Long-Term Business Loans

A long-term business loan has a considerable repayment period and can offer a larger sum of money. These loans can be repaid for up to five to ten years or even longer. Due to these factors, they can be used to purchase cutting-edge equipment, update one’s business infrastructure, and expand one’s business to new places. Long-term cash loans need a higher monthly payment so borrowers are required to put up a collateral to secure them. It is also much more time-consuming for long-term business loans to disburse the funds as additional paperwork is required to validate the loan application.

Short vs. Long-Term Business Loans

• Amount of Loan

The main difference between these two types of loans is the amount of each loan. The larger the credit, the longer the repayment period will be for most cases. Short-term business loans involve lesser money and shorter repayment tenures whereas long-term business loans are for larger amounts and longer repayment tenures.

• Collaterals

Since long-term business loans are for larger sums of money, a collateral is needed for borrowers to secure one. If the borrower fails to make monthly payments, the collateral may be used by the lender to recoup the financial losses. On the other hand, short-term loans do not require any collaterals so they are the more convenient and fast option.

• Interest Rates

Short-term business loans usually have higher interests which compensate for their short repayment period. In a typical scenario, short-term business loans without collaterals increase the risk of loan defaults by borrowers, hence the higher interest rates.

• Processing Time

The main reason for borrowers to choose short-term business loans is the instant disbursement they offer. Hence, the approval process for this type of loan is usually fast and straightforward. Long-term business loans, on the other hand, require a lot more paperwork such as the borrower’s business sheet to evaluate their creditworthiness. The approval process for short-term business loans take roughly 24 hours whereas long-term business loans can take much longer.

Small businesses are more likely to fall for business loan scams as they look around for fast financing options. There are many different types of loans available in the financial industry today that are offered online, and many companies have grabbed the opportunity to apply for one through the convenient way. However, scammers are also out to take advantage of the same situation to prey on desperate business owners. Here are several business loan scams that you need to watch out for.

Advance Fee

Advance fee scams promise potential victims a cheap debt relief if they can provide an advance payment that will be treated as a processing fee. As you might have expected, they then take your money and abscond without disbursing any funds. To avoid such scams, always remember that credible lenders will not ask for any advanced payments upfront. Most lenders will deduct any processing fees from the loan amount to be disbursed.

Peer-to-Peer Lending

Peer-to-peer lending is a legitimate financing option that provides funds through an online platform. This is a widely known option which scammers have joined in to target unsuspecting victims. Peer-to-peer lending scams promise an even easier application process without the need for credit checks. Do not fall for something like this that sounds too good to be true. Some warning signs you can look out for include advanced payments, incredibly low interest rates, and requests for wire transfers. If you are searching for peer-to-peer lending options, always apply with a reputable lender.

Consultancy Fee

Consultancy fee scams often reach out to their potential victims through emails or an online ad. The scammer promises to help you secure some type of financing but you need to pay a consultancy fee. After you have paid the fee, the so-called consultant will disappear and never to be contacted again.

Funding Kit

Funding kit scams are similar to consultancy fee scams. The scammer promises to help you secure a viable loan through the provision of a financing kit that can be priced at a certain rate. The kit is supposed to provide the victim with a sure way to secure financing with attractive loans which seem too good to be true. For those with little to no understanding of finance are at a higher risk of falling for such attractive scams.

Credit Repair

Most people know that a chance of getting a loan relies on their existing credit score. For those with bad credit, it can be exhausting having to be rejected by several lenders. Credit repair scammers promise victims to improve their credit score by a hundred points or more so they can have a better chance at securing a loan. The repair services often come with a fee but they are not legitimate as credit scores cannot be repaired that easily and quickly. The only way to improve your credit score is to work directly with your creditors and not some scammers who claim to have extensive financial background.

Collateral, or an asset pledged by the borrower to the lender for the duration of the loan, is frequently used to secure business loans. The lender may take that collateral and sell it to recoup their loss if you do not make payments on time each month. Collateral is a tool used by lenders to lower their risk of loan loss. The amount of collateral required can vary depending on a number of variables, such as your credit score, the type of lender, and the kind of collateral. Some lenders permit or demand that applicants pledge personal assets as collateral for business loans. Learn more about the different collateral requirements.

What Can Be Used as Collateral for Business Loans?

• Valuable Assets

A valuable asset can serve as collateral, although not all valuable assets can serve in this capacity, and some types of collateral are preferred over others. From the lender’s perspective, the best collateral is anything that can be swiftly liquidated, or immediately turned into cash. Cash is therefore a good choice for collateral. Securities can also be used as collateral for loans, including Treasury bonds, equities, certificates of deposit (CDs), and corporate bonds.

• Tangible Assets

Real estate, equipment, stock, and automobiles are examples of property that can be used as collateral for business loans. These are all physical, tangible assets that may be owned by the company or its owner, or may have loans secured against them. Hard assets, on the other hand, could be more difficult to sell and have an uncertain value. To confirm the worth of your hard asset, you might need to have it appraised in some circumstances.

• Future Earnings

Another category of collateral includes future earnings, such as accounts receivable, which are bills that you have already sent out.

• Personal Assets

Some business loans demand that you put up personal assets in addition to corporate assets, which can be your house or car. In the event that your business does not have enough assets to offer the necessary collateral, the Small Business Administration (SBA) may impose this requirement.

Collateral Requirements for Business Loans

One crucial indicator that lenders use to determine the collateral they require is the loan-to-value (LTV) ratio. LTV is the sum that a lender will advance to you in relation to the value of the security. For instance, if you use real estate as collateral for a company loan, a bank might give an 80% LTV ratio. As a result, even though the property is worth $100,000, it will only lend you $80,000. The discount is the distinction between the fair market value of the collateral and the loan’s principal; in this case, the discount is 20%. The discount on highly liquid assets will be smaller. Normally, a borrower should provide collateral equal to the loan amount. To assist in mitigating their risk, certain lenders, however, could demand that the value of the collateral be more than the loan amount.

“The Five Cs,” which are typical measures of financial health can help determine how much collateral you need.

• Credit history
• Capital
• Capacity for repayment
• Collateral

Conditions (interest rate, loan terms and amount)

Business entities are presented with a larger array of loan options to provide financial support for their operations. Whether you are running a startup or a giant corporation, having enough cash flow will help to sustain your business growth. Here, we have put together the different facets of cash flow vs. asset based lending which can help you pick the right financing option to suit your business needs.

Cash Flow Lending

A company’s cash flow can be defined as the amount of money that flows into and out of the company on a daily basis, which is what makes it possible for the company to stay in operation. In contrast to profits, cash flow refers to the money that comes in and goes out of an organization. Because of this, cash flow loans are an excellent choice for larger businesses that have a consistent pattern of cash flow.

Before deciding whether or not to provide a firm with the necessary capital, potential cash flow lenders will first evaluate the company’s credit rating and cash flow forecast. Businesses that have a high credit score and a continuous cash flow may find that cash flow-based financing is an excellent source of capital for their company.

Asset Based Lending

The difference between asset-based lending and cash flow lending is that the former option is a loan that is based on the value of a company’s physical assets. Asset-based lending is frequently comprised of multiple types of financing, such as invoice financing and a business loan. Cash flow lending, on the other hand, is based on the value of a company’s future cash flow.

This kind of financing is suitable for companies that have valuable property, automobiles, or equipment in their inventory. After using the company’s assets to free up capital, the corporation is then in a position to borrow money against the value of those assets.

Lenders will also choose loan terms based on the worth of the item, with the terms becoming more stringent as the value of the asset increases.

Cash Flow vs. Asset Based Lending

There are significant variations between the two loan options, despite the fact that they are both secure and suitable for firms seeking to effectively control their costs. Below are the key differences between cash flow vs. asset based lending:

• Cash flow lending is ideal for any business with a healthy cash flow, whereas asset-based lending is limited to businesses with tangible assets.
• The collateral is the next distinction between the two forms of lending, as asset-based lending is guaranteed by something concrete. However, cash flow lending is based on a forecasted estimate of cash flow, making it a greater risk for lenders, which may have consequences for businesses seeking this type of loan.

The form of lending you pick might also affect your ability to make repayment. For instance, if you have an agreement for a monthly payback on a cash flow loan but your cash flow is low that month, you may not be able to make the payment. Repayments on an asset-based loan are typically based on anticipated revenue from the assets, such as rental income from a property, which is a more stable source.

If you are looking to take out a business loan with no collateral, there might be a suitable option that can still provide you with the necessary funding. Take a look at the following options and pick one that best meets your operational needs.

Working Capital Loans

Working capital or cash flow loans are typically meant to assist firms in covering short-term costs like a projected cash flow shortage or an investment in expansion. Some instances are:

• improving a leasehold
• redesigning a website
• upgrading a product
• spending on marketing to boost sales
• recruiting new salespeople
• acquisitions of companies

Banks frequently demand security for this type of loan, commonly in the form of accounts receivable, merchandise, or the business owner’s own assets. If the loan is for a smaller sum, however, some institutions do not require one.

Market Expansion Loans

A working capital loan is comparable to a loan for market expansion. Often, a business can receive one without collateral if it has a good financial position and a proven cash flow. It is designed for companies that require funding to expand. Your market can be expanded, a new product can be introduced, or a new location can be opened with the funding. Usually, the terms are created to specifically address the requirements of expanding businesses. To safeguard the company’s working capital, they might incorporate flexible repayment options, such as structuring payments to increase or decrease depending on your cash flow, a simple re-advance process (a way to re-borrow money that you have already repaid on the loan), and paying off the loan without penalty.

Technology Financing

Similar to working capital loans, technology loans have terms that are especially tailored to businesses wanting money to invest in hardware, software, or IT planning, or technology corporations looking for expansion capital. Typically, these loans have flexible payback plans ideal for IT investments or businesses. This kind of loan may be approved without the business owner putting up any collateral, depending on the company’s financial standing.

Personal Loan

Some personal financing options, including credit cards and personal lines of credit, do not demand any collateral. If the sum is not paid off each month, the high interest rate on credit card debt, however, may make such financing unaffordable.

Family, Friends, and Angel Investors

Even though they could request a share in your company, your family, friends, and angel investors might be prepared to offer you money without requiring any collateral. Wealthy people who invest on their own or through angel investors in high-potential start-ups to offer early-stage capital are known as angel investors. They frequently look for an ownership share that can be sold for a healthy profit as the business develops. They also want to have the chance to advise the company to offer their contacts and knowledge.

Loan with no Collateral

Depending on how much financing you are looking at, and the current financial status of your business, you can still take out some form of funding to channel towards your operations. Pick the best type that you can repay on time each month to avoid falling into a cycle of debt.