What types of business loans are there?
Before applying for a business loan, you first need to decide what type of business loan works for you. To help you make a decision, we’ve compiled a list of the different types of business loans to consider.
A business loan enables you to borrow money from a bank or financial lender to cover the startup costs of running a business. This includes covering the costs of:
· The lease
· New equipment and inventory
· Staff wages
But before you make any final decisions about which type of business loan you want to apply for, consider how each loan will impact you and your business.
What are the different types of business loans?
· Business overdraft: An overdraft loan allows you to overdraw funds in your transaction account up to an approved amount. Interest is charged on the amount overdrawn until it’s repaid, and you may have to pay fees and charges as well. An overdraft is usually payable on demand – so if the lender demands payment, it must be repaid immediately.
· Line of credit: As opposed to a loan, a line of credit is not a singular lump-sum payment, but an agreed amount of credit you can draw up to when necessary. You’ll only pay interest on the amount you use, instead of the total amount.
· Secured loan: A secured business loan requires you to use an asset, such as a property or another business, as security against the loan. This usually allows you to borrow more on a lower interest rate, as your lender can take steps to enforce the security, such as sell your asset, to cover your debt if you’re unable to make repayments.
· Unsecured loan: You’re not required to put up collateral with an unsecured loan, but you might face higher interest rates or a smaller loan amount.
· Fixed rate loan: Similar to other types of loans, such as home loans or personal loans, a business loan can come with a fixed or variable interest rate. A fixed interest rate is set by your lender for a period of time (usually between one and five years).
· Variable rate loan: The interest rate on a variable business loan can be changed month to month at the discretion of your lender. Keep an eye on your interest rate as any changes will impact your repayments.
How does InfoChoice compare business loans?
For more than 20 years, InfoChoice has helped people find, compare, choose and apply for a variety products.
We aim to help you make an informed decision about the type of business loan that suits you. We use comparison tools that are informative, accurate, comprehensive and up to date.
To help you compare business loans, we’ve pulled together a list of providers. You can compare by:
· Rates: Choose between a variable or fixed rate interest loan. Our comparison tables allow you to compare how different interest rates will impact your repayments.
· Fees: Watch out for the different fees you may incur, depending on the type of loan you take out. Some include application, service, over-limit, exit and redraw fees.
You can also use our Business Calculator to work out your budget.
InfoChoice can help you find what you’re looking for. Once you’ve decided on the type of loan, the comparison table allows you to click through to your chosen lender and apply online.
If you’re ready to take the next step in getting your business off the ground, start comparing business loans with InfoChoice today.