28 Oct 2021 Types of Business Loans and Their Optimum Usability

Types of Business Loans and Their Optimum Usability

A businessman faces many challenges before he can say that he has made it. Most of these challenges after starting a business are related to maintaining a cash flow.

The cash flow can be irregulated because of the unpredictable market situations, a misbalance between demand and supply, etc. In such cases, most businessmen find their businesses to be on the verge of crashing. Yet, most of them manage to survive because of short term business loans and monthly loan Singapore.

Monthly loan Singapore and short term business loans are two types of loans offered to businessmen in Singapore to keep their businesses afloat in times of crisis.

This blog will parallelly discuss both these types of business loans in Singapore.

What are Short Term Business Loans?

As the name describes, short term business loans are loans given to businesses on short terms. These loans are intended to address any immediate need of a small to medium amount and expect repayment in a short period.

These types of loans are useful to cater to short-term needs such as to pay off the staff in a bad month, stock up the inventory, make urgent upgrades or repairing, etc.

As soon as the crisis passes and business is back to normal, the loan can be paid off quickly.

What is Monthly Loan Singapore?

A monthly loan Singapore is also known as a monthly installment loan. A monthly loan Singapore is a long-term loan, and it provides more than needed to cover up for immediate needs and takes a more extended period for the repay.

It is called a monthly loan because usually, the payback is in the form of regular monthly installments.

A monthly loan is usually taken for upgrades in the business, such as extensions, branching out, etc. It helps the business increase its revenue and payback from the extra revenue every month until the loan is paid off.

Which Business Loan is for You?

Both short term business loans and monthly loan Singapore have their pros and cons. The basis that you need to make an informed decision regarding your business on is the amount of money you need and the time you require to pay it back.

Your need will also help you decide which one to pick, but there is no hard and fast rule. If you think you need a larger amount for your immediate and you can manage its monthly installments, you can go for a monthly loan Singapore.

Similarly, if you do not need that much money for an expansion or any other bigger step, it is better to go for short term business loans.

But if you are unsure, it is better to stick with the general rule and go for short term loans for immediate and long-term loans.

Other Types of Loans:

Though short term business loans and a monthly loan Singapore are the two major types of business loans in Singapore, there are some other types that you should be aware of to make the best possible decision.

These loans do not differ based on the loan amount and payback period but the payback method.

  1. Merchant Cash Advance:

A merchant cash advance is a good option if you do not want to get stuck in a commitment, as you can pay it back through a percentage of your monthly credit card sales. It liberates you from the pressure of generating a set amount of revenue every month to pay your installment.

But the payback conditions can be steeper, and if you are struggling to make ends meet with your current revenue, a merchant cash advance might not be the best option for you.

  1. Invoice Financing:

Invoice financing is the best option for businesses with a waiting period between delivery of services or products and release of payment.

For example, if your business gets an order that requires one week of preparation but you will get your payment after delivering your products, invoice financing can provide you revenue for that period.

You can use that money to complete your current order or prepare for the next one while you await the payment from your previous ones.

Other businesses that often face delayed payments can also benefit from invoice financing.

  1. Working Capital:

The working capital loan is the best option for those who have their business sorted and want to remain in complete control of their loan repayment.

A working capital loan has a repayment method of consistent monthly payments, just like a monthly loan Singapore but has a shorter term, closer to short-term business loans.

Though a working capital loan provides the best of both monthly loan Singapore and short term business loans, it can be challenging to pay back if your monthly revenue is inconsistent and you doubt if you will be able to manage the installment every month.

  1. Business Line of Credit:

The business line of credit is a loan type best for those with a recurring need for loans and cannot decide what amount of loan they should get.

A business line of credit works like a credit card, allowing business owners to get the money they need without deciding on a fixed amount. The payback is only for the used amount, so there is no risk involved.

This loan type allows greater flexibility than other kinds of loans and can be a great option if you struggle to establish your business.

Conclusion:

The blog covered most types of loans and discussed their loan amount, payback term, and optimum usability.

With the knowledge of the primary functioning of these loan types, you will be able to make an informed decision by choosing the best option for business and supplementing it for the following stages.

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