Borrowing money is essential to long-term business success. But with so many types of business loans out there, it can sometimes be difficult to determine what makes the most sense for your operation. This can be even more true for new business owners, who may be slowly getting acclimated to the financial circumstances of business ownership, and consequently may be unsure about the particularities of differing types of loans.

Understanding what types of lending are available to your business, and what types are particularly helpful in given situations, are both essential to building a business that is fiscally sustainable in the long-term.

Lines of Credit

Lines of credit can be enormously useful for a small business. A credit line offers flexibility in borrowing, and its value can hardly be overstated as you build and sustain a business.

A credit line will offer funding up to a certain limit (typically a higher limit with a secured line, which requires putting up some form of collateral). Once you have reached the limit, you will be unable to borrow more until you repay.

Lines of credit are quite useful in maintaining a cushion for unexpected short-term expenses, like relatively smaller purchases or emergency repairs. They also help build your business’ credit score over time, through regular repayment.

Asset-Based Loans

Asset-based loans are another useful way to secure quick funding. An asset-based loan is lent on the basis of some asset that you put up as collateral, and that asset may be fairly diverse — equipment, inventory, real estate, or something else of tangible value.

Asset-based loans are generally quick to be approved, and they may be fairly open about possibilities for use — ensuring access to a hefty sum of cash quickly.

Venture Capital Investments

While distinct from more typical business loans, venture capital investments can be very useful in building a business. Venture capitalists typically invest in new enterprises, often to a substantial degree, in exchange for some level of ownership equity in the new business. 

If you have a good idea, but are having trouble securing funding, venture capital may be able to assist. On the other hand, a VC investment may require sharing ownership of your business, and collaborating on important decisions, which can be a non-starter for some new entrepreneurs.

These are only three of the many types of loans that can be helpful for small businesses. Comprehensively surveying your options, and working with a financial professional, can help determine the best lending options for you.