Questions That Will Help You In Choosing The Right Small Business Loan

I believe many of us are in need of a business loan in 2017, but honestly finding the right lender and type of loan can be a confusing process. Now the first step is to solve this problem is to answer several critical questions in order to help point you in the right direction:

    How much money do you need?
    What do you need the money for?
    How quickly do you need the money?
    How long will it take you to pay it back?
    How long have you been in business?
    What is the current financial shape of your business?
    How much collateral, if any, do you have to put up for the loan?

Answering these questions will help determine if you should pursue a government-backed loan, a loan or line of credit through a bank, or a cash advance, line of credit or loan from an alternative lender.

If after answering these questions you know which type of lender is best for you, you can check our recommendations for various types of loans on our best picks page. If you're not sure yet, keep reading.

Here's a breakdown of what you need to know about each type of lender.
Small Business Administration Loans

The Small Business Administration (SBA) offers several loan programs designed to meet the financing needs of a wide range of business types.
With these loans, the government isn't directly lending small businesses money. Instead, the SBA sets guidelines for loans made by its partners, which include banks, community development organizations and microlending institutions.

The SBA helps eliminate some of the risk to lenders by guaranteeing that the loans will be repaid.
Businesses have a variety of SBA loan types to choose from, each of which comes with its own parameters and stipulations on how the money can be used and when it must be repaid.

Pros and cons: The government guaranty, which typically covers between 75 and 90 percent of the loan, eliminates much of the risk for the lender. In addition, the terms of an SBA loan also tend be more favorable to borrowers. The downsides are that additional paperwork needs to be filed, extra fees need to be paid, and it takes longer to get an approval.

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