What types of startup loans are available?

There are several types of loans that startup businesses can consider based on their needs and availability. Below is a list of commonly available options:

• Term Loans: These provide a fixed sum for a set tenure, generally ranging from 3 to 5 years. The principal and interest are repaid in instalments over the term. Term loans assist in purchasing assets, managing working capital, or business expansion.
• Overdraft Facilities: It enables startups to withdraw funds beyond their account balance up to an approved cap. This meets urgent working capital needs. Interest is paid only on the overdrawn amount until repayment.
• Secured Loans: Startups can secure larger loan amounts for longer tenures by pledging assets like property, equipment, or securities as collateral. However, the assets are at risk of seizure upon repayment default.
• Unsecured Loans: No collateral is required, hence simpler documentation. However, loan tenure and size are constrained. Loan providers assess historical finances to evaluate creditworthiness.
• Invoice Discounting: Provides funds against outstanding client invoices. A percentage of the invoice value is financed to address cash flow constraints.

Evaluating the merits and demerits of these commonly available options facilitates startups to identify suitable financing.