Running a small business comes with its own set of challenges. The business needs cash for smooth operation and expansion. Small business loans provide businesses with financial resources and enable them to compete with big companies in the same industry.

There is an overwhelming number of small business loans Charlotte NC. These loans differ in their purpose, interest rates, duration, processing time, and loan amounts.

Choosing the wrong kind of loan can have detrimental effects on your business. The processing time can be longer than expected, and you may lose on opportunities, or the loan amount may not fit your requirement.

Hence, there is a need for adequate research and assessment of your business needs before you apply for any of these loans.

Different types of small business loans that can help your business are listed below.

1. Term loan

Term loans are one of the most common financing options for small businesses. You can use these types of loans for a variety of purposes like equipment purchase of working capital needs. The loans need to be paid over a predetermined term along with a fixed interest rate. The loan may require a personal guarantee or collateral.

2. A business line of credit

Another popular small business loan in Charlotte, NC, is a business line of credit. Rather than providing a lump sum loan amount, it provides you access to a sum of money that you can withdraw as and when you need it.

The loan provides you with flexibility as you pay interest only on the amount withdrawn. This is a suitable financing option when you are unsure about the exact amount of money you need.

3. SBA loan

Small Business Administration loans are suitable for businesses looking for a low-cost government-backed financing alternative. SBA is not a lending institution. However, it guarantees a part of your loan, which encourages banks and other lenders by reducing their risk.

SBA loans are low-interest loans with a longer repayment period. However, the loan has numerous qualification criteria and is paper-intensive. Also, the loan may take longer to process compared to other financing options.

4. Invoice factoring

Invoice factoring is suitable for businesses facing a shortage of cash due to unpaid invoices. The business can receive a percentage of its unpaid invoice value upfront. The receivables are used as collateral, and the lender collects them on your behalf.

These small business loans in Charlotte, NC, can help you manage your working capital needs. However, the loan rates can be comparatively higher. The lender charges a certain percentage as fees till your debtors make the payment.

5. Equipment financing

Equipment financing is a small business loan that allows you to acquire equipment and machinery for your business without investing any capital. The financing option does not create any encumbrance on your personal or business property.

The equipment itself acts as the collateral for the loan. These loans have a faster processing time and favorable interest rates in comparison to other small business loans in Charlotte, NC.

6. Merchant cash advances

Merchant cash advances are another popular small business loan in Charlotte, NC. In this financing option, you receive a lump sum of cash up front that can be used to cover any business-related expenses.

You borrow the money against your future sales. The payment can be made as a portion of your card sales, or the money can be deducted from your bank account on a daily or weekly basis.

The benefit of this financing option is that the payment depends on your sales. Hence, when the business is slow, you pay less, and when the revenue is on a rise, you pay more. However, this financing option can be more expensive than other types of business loans.

These are some of the financing options for small businesses and can help them meet their need for cash to finance operating expenses or invest in capital assets.