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Types of NJ Small Business Loans

Achieving your goals for your business might require more money than you currently have available. Many small business owners have ideas for how to grow their businesses but encounter problems with bringing them to fruition because of inadequate cash flow. Even if your business’s cash flow is reliable and steady, it might not be enough to do the things you want with your company. In that type of situation, getting a NJ small business loan might be the answer to help you bring your vision for your business to life.

Before you apply for a business loan, however, it’s important to understand the various financing options that are available for small businesses and how they work. At New Bridge Merchant Capital, we have provided this overview of the various types of business financing options so that you have a better idea of which might work best for you.

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Small Business Administration (SBA) Loans

Loans through the SBA are not issued by the agency. Instead, the agency serves as a guarantor for a portion of the loan amounts to encourage lenders to approve loan applications. Since they are partially guaranteed, these loans lower the risk of default for lenders, including credit unions, banks, and other financial institutions.

Lenders frequently hesitate to approve small business loans because of the risk. When the SBA guarantees a loan that a lender approves, the lender will need to get their loan criteria approved by the SBA.

There are various types of loan programs offered by the SBA, including loans to purchase inventory or real estate, for business expansion, or debt repayment. SBA loans offer simple repayment plans and lower interest rates than traditional term loans through banks. However, they also have very stringent criteria, so they are often difficult for small businesses to qualify for and can be as difficult to get as traditional bank term loans. Getting an SBA-backed loan can involve an application process that takes weeks or months and require you to undergo credit checks and put up collateral, so it is not the best option for everyone.

Traditional Bank Term Loans

A business term loan from a bank involves receiving a lump sum of money upfront for which you will immediately enter repayment. The payments will be due in regular installments with interest over a pre-determined period. Traditional business term loans are difficult for small businesses to get and are designed for larger, established companies. Banks typically view small businesses as too risky. As a result, most applications from small business owners are denied by banks.

The requirements are stringent and often require collateral to secure the loans. Banks will check the credit histories of both the business and the business owner. The application process can take weeks or months. Even if your business can ultimately gain approval, a traditional business term loan from a bank might not be the best option. If you get this type of loan, you will pay interest on the entire amount even if you only need a small portion of the loaned amount.

Credit Cards for Businesses

Getting a credit card for your business can provide access to funds faster than a loan. A business credit card can make sense for certain types of purchases. With a credit card, you can finance nearly anything you need for your business up to your card’s credit limit. As long as you are responsible with your credit card and make your monthly payments on time, you can access your credit as many times as you need while building your business’s credit history.

Getting a business credit card can be an option for business owners who do not have a strong credit history or collateral and need quick financing. While it can be a good option, there are several things to consider before applying for a business credit card.

Danger of Spiraling Debt

Just like consumers who fall into debt spirals with their personal credit cards, small businesses also run the risk of spiraling debt when they allow their balances and interest to accumulate to the point at which they struggle to pay their monthly payments on time. If you miss a payment, your unpaid balance will roll over. Interest will be charged to your new balance, so your next payment will go up. If you can’t pay the full balance quickly, this cycle can continue and create ever-increasing debt that is difficult to overcome without getting a large cash infusion.

Variable Rate of Interest

Business credit card companies can reduce credit limits or change the interest rates on cards at any time. When your business relies on credit cards for financing purchases, you can find that your interest rate suddenly goes up, or your credit limit is reduced without warning.

Dependent on Your Personal Credit

Most business credit cards are linked to the personal credit of the business owner. If you can’t make your payments on time, your personal credit score could be impacted.

Credit Limit

A business credit card will have a credit limit, and it can sometimes be difficult for a business to stay within a card’s limit. Some business owners try to get around this issue by using multiple cards, but doing so could invite a debt spiral as previously described.

Can’t Be Used for Everything

If you need access to funds to pay rent or make payroll, you might not be able to use a business credit card to make these types of payments.

Merchant Cash Advance (MCA)

An MCA is a financing option through which the lender provides a business with a cash advance upfront. If you are approved for an MCA, you will be given the funds upon your agreement to repay them together with a fee based on your business’s daily sales. You’ll typically be required to make payments out of your daily credit card sales until the full amount of the cash advance is repaid. For this reason, lenders that offer MCAs typically want to see that your business has numerous credit card transactions.

A great benefit of an MCA from New Bridge Merchant Capital is that the application process is simple and fast. If you are approved, you will receive the money quickly. However, if your business does not have a lot of credit card transactions, a different option might be better.

Invoice Factoring

Factoring companies purchase unpaid invoices from small businesses and give them a portion of the invoices upfront. These lenders retain a percentage of the invoices until the business’s customer pays it by making payments to the factoring company. This type of financing option allows businesses to receive the money they are owed upfront without waiting for payment from their customers. However, most of your business’s income must come from invoices that are paid slowly. You’ll also need to have a good credit history and a record of customers who consistently pay.

Lending Marketplaces

Lending marketplaces are platforms through which online investors can bundle their investments to loan money to small business owners. Online investors earn profits from commissions and fees from both other lenders and borrowers.

Business Line of Credit

Business Line of Credit

A business line of credit is a flexible financing option that allows small businesses to draw only the money they need. If you get a business line of credit, you will only be charged interest on the amounts you draw instead of the total credit limit.

A business line of credit is a good option when you need access to cash from time to time and only want to draw what you need instead of receiving a lump sum upfront. When you are approved, you’ll have a maximum credit amount available. You can then draw what you need from your line of credit. As you repay what you have taken out, the available funds will be replenished so that you can use your line of credit over and over again.

If you have an unexpected expense, you can cover it with your line of credit. Lines of credit are flexible and can be used for nearly anything, including the following:

  • Meeting payroll
  • Paying business operating costs
  • Covering seasonal cash flow shortages
  • Other purposes

Most business lines of credit from banks are secured. However, an unsecured line of credit might be available through an online lender.

Online Lender

An online lender like New Bridge Merchant Capital offers an alternative source for small business financing and a hassle-free application process. When you apply for a business term loan, MCA, or business line of credit with us, your application process will be quick. There is little paperwork involved, and you can receive a decision within hours or a few days. You will need to provide your business and personal information during the application process. We offer collateral-free loans with terms of up to 24 months and low rates starting at 15.99%.

You can secure funds for many purposes through New Bridge Merchant Capital. We offer financing options to small businesses to purchase equipment, buy inventory, cover cash-flow gaps, expand business operations, complete renovations, and more. With a line of credit, you will only pay interest on the amount you use instead of the credit limit of your line of credit. As you make your payments, the total amount will be available to use over and over again.

It only takes a short time for you to register and apply online, and we can provide you with a credit decision within hours. Most of our customers have access to their funds within 24 hours, and we approve 83% of the applications we receive. We will analyze your business to determine whether you qualify through a fast process.

We offer collateral-free term loans, making New Bridge Merchant Capital convenient for small business owners. Our fees are easy to understand. You can receive funding for your business through a term loan with a repayment schedule of up to 24 months and use the money to work toward achieving the goals you have for your business.

Deciding Between Financing Options

There are many financing options available as described above, but not all of them will be good options for small business owners. You will need to consider each of the types of business loans and choose the type that will meet your needs the best.

Before you apply, you should consider the following information:

  • Your personal credit – If you plan to apply for a traditional term loan, your personal credit will be checked as a part of the underwriting process. Your credit score must be high to increase your chances of being approved for a traditional term loan or an SBA-backed loan. If your personal credit score is low, you might be rejected. At New Bridge Merchant Capital, however, we offer funding options to small businesses even if their owners have bad credit because we consider other factors.
  • Your business’s credit history – Your business should have a history of making its payments on time. Many lenders consider the credit histories of small businesses before they will agree to approve loan applications. Make sure you pay your suppliers and vendors on time to build good business credit.
  • How long you have been in business – It is easier for established businesses that have been operating for several years to get approved for business loans than for newer businesses. New startup companies typically have trouble securing loans because of the risk involved.
  • Your business’s annual revenues – Your options for business loans or alternative financing will depend on how your business generates income and its annual revenues. You should also take your revenue into account when figuring out how much you can afford to take out while meeting your payment obligations.
  • How quickly you need access to funds – The application process for traditional bank business loans and SBA loans is lengthy and complex. In some cases, it can take several weeks or months for a bank to make a credit decision. If you need access to funds quickly, our business financing products are likelier a better choice.

Talk to Us Today

If you need funding for your business, you should take advantage of our business financing options to meet your needs. Contact New Bridge Merchant Capital today to learn about our term loans, business lines of credit, and merchant cash advances to determine which might work for you. You can also submit your online application today to get access to the funds you need quickly.

Work With a Leading Commercial Lender

At NewBridge Capital Solutions, our loan products can help businesses of all sizes. With our exceptional customer service and reputable funding, we have become a trusted leader in the commercial finance industry. If you want to apply for a term loan that can provide working capital for your business, make sure to contact us.
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