6 Credit Options to Help Grow Your Small Businesses

Overhead, equipment, payroll, operating expenses…there’s seemingly no end to the list of things that small business owners need to finance just to keep their business running, let alone growing.

Fortunately, there are plenty of credit options available to address both short- and long-term needs, including ones designed for those that don’t qualify for conventional loans. Here's a look at some of the options and why they may—or may not—work for you:

Business Lines of Credit

Ideal for: short-term financing, emergencies, or seasonal needs

Sometimes referred to as a Working Line of credit, a business line of credit provides flexible access to funds up to a predetermined limit. This option allows you to borrow only what you need and pay interest only on the amount used. It's ideal for managing cash flow, covering unexpected expenses, or taking advantage of short-term opportunities. Business lines of credit typically have lower interest rates compared to credit cards and can be secured or unsecured.  

Equipment Loans

Ideal for: large assets that could strain cash reserves

Whether you need to purchase, repair, replace, or upgrade the equipment and technology that keeps your business running, an equipment loan provides the means to fund the investment without tying up large sums of cash. Plus, these loans are secured by the equipment itself, which often results in lower interest rates and easier qualification compared to unsecured loans. Repayment terms are usually tied to the life expectancy of the equipment, typically three to 10 years. While longer the repayment term increases the amount of interest you pay overall, it also works to make payments more affordable each month.

Vehicle Loans

Ideal for: purchasing, replacing or refinance business-related vehicles

From cargo vans and small cars to light-duty trucks and even dump trucks, dependable transportation is what keeps many businesses rolling. With terms ranging from three to seven years and even discounted APRs when using autopay bill payments, you can structure a vehicle loan that works for your current budgeting and future growth plans.

Commercial Real Estate Loans

Ideal for: buying or building new property, renovating existing income-producing property or refinancing debt on a commercial property 

Like a mortgage for personal real estate, which is secured by the home it covers, commercial real estate (CRE) loans are secured by a lien against the commercial property. Where they differ is in that term for CREs typically range from five years or less to 20 years, with the amortization period often longer than the term of the loan.

Real Estate Investment Loans

Ideal for: buying property from which you can generate income

Real estate investment loans make it possible to purchase property you plan to generate income from by leasing it to one or more tenants who pay monthly rent. Eligible non-owner-occupied property types include:

   •  Office buildings
   •  Mixed-used commercial buildings
   •  Multi-family homes, such as a duplex or triplex
   •  Condominiums or townhomes
   •  Manufactured homes

Small Business Administration (SBA) Loans

Ideal for: a wide range of business purposes

The U.S. Small Business Administration offers several loan options ideal for small businesses. With options ranging from $500 to $5.5 million, SBA loans for can be used as working capital or to pay for long-term fixed assets and operating capital. SBA loans often have competitive interest rates, flexible overhead requirements, longer repayment terms compared to conventional bank loans, and, in some cases, no collateral requirements.

If you’re evaluating credit options for your small business, you may find it helpful to consult with your lending institution to review:

   •  Your specific funding needs and timeline
   •  Your business's qualifications (credit score, time in operation, revenues)
   •  Cost of capital (interest rates, fees, and terms)
   •  How quickly you need the funds
   •  Impact on cash flow and ability to repay

The right financing tools can fuel your small business's growth while maintaining financial stability.

DISCLAIMER: This article is meant for educational purposes only and is not intended to be construed as financial, tax, investment or legal advice.