There are over 30 million small businesses in the United States and new businesses opening their doors every day. If you are going into business soon or recently started a small business it is good to be aware of the different types of commercial debt.
Keep reading to learn the most common kinds of commercial debt that are good to know about as a business owner.
SBA Loans
These are loans and grants that are given by the U.S. Small Business Administration. There are different types of SBA loans but typically a business can apply for a general small business loan also known as the 7(a).
Keep in mind that obtaining an SBA loan can be a more difficult and lengthy process.
Bridge Loans
This is a first mortgage loan on a commercial property that is taken out as a short term loan. The lease term can be anywhere from three years to 6 months, depending on the lender. Keep in mind that the interest rate is a higher rate than permanent loans.
Permanent Loans
This loan is a first mortgage on a commercial property. To qualify for a permanent loan the loan has to have some amortization and it has to also have a term of at least five years.
Lines of Credit
You can take out a small business line of credit. This is not to be confused with a loan because it is not the same. A line of credit means that you are approved a certain amount of money and you withdraw it as needed. A loan, on the other hand, you are given the entire amount you are approved for.
A smart thing about taking out a line of credit is that you only pay interest on the money you take out. You do not pay interest on the entire amount you were approved for unless you use the whole amount. Something else to keep in mind with a line of credit is that the APR might fluctuate.
Be Smart
You want to go into business with knowledge of these types of commercial debt that you can get into and make smart financial decisions along the way. If you ever find yourself in a bind because you took on too much debt, then make sure you check out some debthunch reviews and get out of your situation quickly before you dig a deeper hole.
Now You Have More Knowledge of Commercial Debt
Pat yourself on the back for taking the time to educate yourself on commercial debt. When we are educated on a topic it allows us to make better decisions and not have regrets in the future.
Do your research on which loan is best for you if you decide you have to take one out to help you expand and grow your business.
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