Small business financing is capital that every business owner needs to start, run, and grow their small business. When you begin to dive into the details and consider how much you’ll need, what you’ll qualify for, and all the financing options available – it can become rather complicated.
Below is a description of the most common ways to finance a business that can help you determine which type of lending works for you.
Lines of credit
If you’re looking to manage cash flow or expand your business, consider a working capital line of credit for more flexibility. The interest rate is typically variable1, and lenders may require assets for loan collateral. These revolving lines can be used for unexpected expenses, expansion opportunities, or short-term finances.
A term loan is a loan for a specific amount and a set repayment schedule with either a fixed or floating interest rate1. For example, you can use term loans for refinancing existing debt, purchasing machinery and equipment, or other long-term financing needs.
Commercial real estate loans
Buying property for your business is a smart choice. An owner-occupied real estate loan will allow you to build equity, make your expenses more predictable and possibly gain tax advantages2. If you’re looking to purchase a building for your business, this article lists a few factors to consider when buying a storefront.
The Small Business Administration (SBA) offers several loan programs designed to meet the financing needs of a range of business types. With these loans, the government isn’t directly lending small businesses money. Instead, the SBA sets guidelines for loans made by its partners, which include banks, community development organizations, and microlending institutions. The benefits of SBA-guaranteed loans are lower down payments, flexible overhead requirements, and no collateral needed for some loans. SBA guarantees reduce the risk for lenders and makes it easier for businesses to get loans. A few SBA loan programs are:
- 7(a) loans – This is a group of SBA loans that guarantee portions of the total amount, cap interest rates, and limit fees.
- 504 loans – Long-term, fixed-rate financing to purchase or repair real estate, equipment, machinery, or other assets.
Choose the best small business financing for you
There are several ways to finance your business. To figure out which method is best for your business, you should consider questions like:
- Do you need business financing now, soon, or in the future?
- How will your business fare with daily, weekly, or monthly loan repayments?
- How much money do you need?
- Where do you see your business going and growing?
- What do you need the money for?
- What’s your credit score?
- Are you looking for a short or long-term loan?
- What type of collateral do you have to offer?
You make the decisions for your business. When you plan ahead, think carefully, and make well-informed choices – the business financing you look for and select will shape your business.
Are you ready to fund your business? Contact a business banker or your local banking center to learn about your small business lending options.
All loans subject to credit approval. Equal Opportunity Lender.
1 Rate subject to increase after consummation
2 Interest may be tax deductible. Consult your tax advisor on the deductibility of interest and charges.