Insufficient capital is the number one reason why most tech companies fail within the first five years. New technological developments happen every day. In fact, the IT and technology industry is one of the fastest-growing industries globally. It’s important to remain competitive and keep up with the latest trends. Without access to working capital, there’s a good chance your business won’t be as competitive. Fortunately, there’s a simple solution to cash flow issues: IT and technology business loans.
How to Use IT and Technology Business Loans
As mentioned, the tech industry is fast-paced. It’s crucial you be forward-thinking and adaptable to the technological changes that come with the industry. IT and technology business loans can help you improve your company, keep up with the trends, and stay competitive.
Related: 7 Tips to Increase Your Chances for a Small Business Loan Approval
Here are some of the things you can do with an IT business loan:
- Marketing: Every business needs an effective marketing strategy to grow and remain competitive. If you want your business to be in a position to compete against large tech companies, it’s important you market your business correctly. With a small business loan, you can hire a reputable marketing company to help you create an effective marketing strategy for your business
- Business Expansion: Growth and expansion is an exciting time for business owners. However, it can get costly for smaller tech businesses. IT and technology business loans can help cover the cost of expanding your company.
- Additional Working Capital: Working capital is important for all types of businesses, but it’s especially important for tech companies. Additional working capital can help fund the development of innovations so you can stay ahead of your competition.
- High-Quality Equipment: In the technology industry, having the latest equipment is crucial. You won’t be able to create high-quality and innovative technology with outdated equipment. Since tech equipment is costly, an IT and technology business loan can greatly help your business thrive in a competitive industry.
4 Loans for IT and Technology Business
There are many business loan options for IT businesses. Here are the top four loans you should consider:
1. SBA Loans
The Small Business Administration (SBA) knows that small business owners have a difficult time qualifying for bank loans. The government wanted to provide a solution to help small business owners secure bank-rate loans. For this reason, the SBA specifically created different types of SBA loans for small businesses. The government guarantees up to 85% of the loan, which lowers the risk for lenders and is an incentive for them to approve you for a loan.
Many small business owners apply for SBA loans because of their long repayment terms, lower interest rates, and higher borrowing limits. For this reason, applying for SBA loans is highly competitive and lenders look for prime borrowers.
2. Equipment Financing
If you’re looking to purchase equipment for your tech company, equipment financing can help you out. Once qualified, lenders will give you the money you need to buy the equipment. Additionally, you don’t have to pledge any personal or business assets since the equipment you’re looking to purchase secures the loan. The repayment term for equipment financing can last from one to five years with interest terms ranging from 5.25% to 24.99%.
3. Invoice Factoring
Your pending invoices may be the solution to your cash flow issues. Invoice factoring is a great option for tech companies that need working capital in a pinch. This financing option allows you to sell your pending invoices in exchange for immediate funding so you won’t have to wait for 30, 60, or 90 days to get paid. Just like equipment financing, your invoices serve as collateral for the loan. Also, invoice factoring is great for business owners with bad credit since lenders are more concerned with your clients’ creditworthiness than yours.
4. Business Term Loan
A business term loan is the most common type of loan that is repaid over a specific period of time. It’s what most people think of when they ponder a business loan. The repayment terms for most business term loans can last for a few months on up to a high of 10+ years. Most lenders may also require you to secure the loan with collateral.
Apply for IT and Technology Business Loans for Your Tech Company
If your tech company needs additional funding, be sure to consider the types of IT and technology business loans mentioned above. To help you find the best loan for your IT business, be sure to consult a financing expert before making a decision.