Some small business owners don’t consider small business loans a necessary part of doing business. They assume that they’ve made smart moves when it comes to their financial planning, and they believe that they’ve assessed and accounted for all of the risks that could possibly happen during the year.

The problem with this line of thinking is that you can’t predict what will happen to your business. All sorts of things can pop up that can cause a business to need a sudden infusion of cash. These events could be anything from needing to replace broken equipment to suddenly needing to bring on new personnel. If you don’t have the cash to handle those costs, you could put your company at risk. Veteran business owners will tell you that having access to funding helps reduce the amount of stress associated with running a business.

Having said all of this, small business loans are difficult to get, as stated by Experian. Small businesses need to jump through hoops with traditional small business lenders in order to get approved, and many don’t even get approved after doing so. There are several different types of small business loans available. Check out below to learn the pros and cons of the different types of small business loans available and to see which ones you could possibly qualify for.

SBA-Backed Bank Loans

Pros
SBA-backed bank loans are the creme-de-la-creme of small business loans. They have extremely affordable terms, and they usually have between 6 percent and 8 percent interest rates that amortize over 10 years. They have generous loan amounts that can really help businesses manage their businesses the way they need to be managed.

Cons
SBA-backed loans are extremely hard to get. You have to have extremely high personal and business credit scores of at least 680. You also need to have a business that has had at least two years of continuous operation. Your company will also need to have high annual revenues. Most banks have a minimum annual revenue threshold that ranges anywhere between $50,000 and $150,000 and higher depending on the size of the business. Many banks require much more than that. You also need to be able to prove that you’ll be able to pay back the loan. Most banks want you to have an income that is at least 1.25 times your company’s operating expenses. That amount will need to include the repayment amount that you will be responsible for if you get the loan.

Microlender

Pros
Micro lenders are nonprofit organizations that extend short-term loans to small businesses. They’re really helpful for companies that need to fill in temporary financial gaps .

Cons
These loans rarely go above $35,000, so they’re only really good for companies that have short-term needs that require relatively small amounts of cash.

Online lender

Pros
An online lender is perfect for people who don’t have any collateral or are unable to get loans from any other sources. These lenders can typically get your money to you in as little as 24 hours, making them perfect for businesses that need their funds right away. Online lenders tend to approve loans really easily.

Cons
Going through an online lender can be extremely expensive. The APR that you get through an online vendor can easily exceed 108%. If you’re going to go through an online lender, simply make sure that you’re really serious and aggressive about paying the loan back so that you don’t put your business in financial jeopardy.