Check below the main small business lines of credit for companies available in the market and evaluate which alternative will meet the demands of the business without impacting its financial health. Compare:
- Secured loan
As the name implies, in the secured loan the interested party presents an asset to the financial institution to ensure the payment of the installments. Among the most common modalities are the loan with vehicle collateral and the loan with property collateral, also called home equity.
Financing, unlike a loan, is a credit granted for a specific purpose defined in a contract, such as the purchase of a property, vehicle, or equipment. The credit conditions vary according to the financial agent, and it is possible to finance from 80% to 100% of the asset, and the payment term can reach up to 60 months.
This type of credit can be contracted by entrepreneurs from large to small, directly in banks and specialized financial agents. The monthly interest rates vary between 2% and 7% per month. Therefore, it is always worth researching and comparing the conditions offered before closing a deal.
- Credit for working capital
This type of small business lines of credit is available to meet the various cash flow needs of companies, such as the payment of salaries, suppliers, and rent, for example.
Unlike financing, in this case, it is not necessary to explain the purpose of the loan at the time of application. In addition, it is possible to opt for bi-monthly, semi-monthly, or full payment after the end of the contract.
However, this type of credit is indicated for short-term demands, since the average installment term is usually 12 months. It is possible to contract the credit directly with the financial institution where the company has a current account, or with companies that specialize in corporate credit. In any case, it is always worth comparing the interest rates and conditions offered.
- Peer to peer
Peer-to-peer (P2P) is a line of credit for businesses that connects borrowers to investors via digital platforms. In this way, it is possible for investors – who can be individuals or companies – to lend money directly to the company, i.e. the operation does not depend on a financial agent.
Risk verification consists in checking the financial profile of the borrower. Investors can make available all or part of the amount to be lent. This allows them to share the risk of the operation.
- Credit Unions
Credit unions offer credit products similar to a common financial agent, such as credit cards, financing, and working capital loans, to promote regional development through community self-interest.
- Angel Investors
For those seeking lines of credit to start a business, it is worth resorting to angel investors, who are individuals who invest in companies with high growth potential. In this type of operation, the angel investor – which can also be a small group of individuals – receives a minority stake in the venture, between 5% and 10%. More than money, investors can contribute by sharing experiences and strategic contacts.
The non-profit organization “Anjos do Brasil”, for example, offers opportunities for contributions of between $21000 and $150000. But to raise funds, companies must present innovative products or services that have high growth potential and present scalable processes. These are some of the methods that are used to get small business lines of credit.