What Type of Loan is Best Suited to Grow Your Business?

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If you’re looking to expand your business, having access to working capital can be the cornerstone for growth. Business loans are not just for difficult times when your business is experiencing a profit deficit. In fact, they can play a vital role in increasing your cash flow so you can fulfill the needs of your growing business and remain competitive.

Too often, small business owners use their own personal capital to invest back into their businesses. Though this can be successful, there are alternative ways to increase funding without risking your own financial stability. There are a variety of business loans designed to help you meet your financial goals: from taking out a line of credit or term loan to acquiring a business auto loan. Let’s look at some of the loan options available and how they can help grow your business.

Term Loans

A term loan is a loan from a bank or credit union for a specified amount that has a specific repayment schedule. The interest rates are typically either fixed or floating. Though not identical in terms, they’re not dissimilar from student loans, auto loans, or mortgages.

A term loan can be the ideal option for financing the capital you need and expanding your business. You can use your term loan to consolidate debt or increase the scale of your operations by purchasing tools, equipment, and machinery. You may also choose to use it to hire new employees, add products or services, or invest in marketing. All of these ventures may be the key to growth within your business but are quite costly. A lack of capital can easily keep the necessary tools for your business out of reach and halt your growth. A term loan will increase the cash flow so you can increase your opportunity for success.

A term loan is advantageous because you can lock in your rate and monthly payment, making financing easier with a fixed budget. These loans tend to be longer-term loans, so the interest rate is typically lower. Additionally, since a term loan is debt-financing, you have control over how the money is appropriated. You aren’t giving control of your business over to an investor and can choose how to best direct your money.

Business Auto Loan

Another way to grow your business is through a business auto loan. These days, many businesses are on the move. If you need to travel for work or your business itself is mobile, having a business vehicle may be an important component for success.

There are several advantages to taking out a business auto loan. Because these loans have built-in collateral, they’re considered low risk for the lender. The lender is still likely to recoup the debt even if you default on your loan. This alleviates the risk and so lenders are willing to charge less interest. For the same reasons, lenders will allow longer repayment plans. This enables you to pay off your debt gradually with lower monthly payments. Built-in collateral also poses less risk for you and your business. At a critical time of growth, your business won’t have to provide outside collateral.

If you’re shopping for a business vehicle in Oregon, consider choosing Rivermark Community Credit Union. We offer low loan rates on new or used vehicles and help you own your business vehicle faster. With low interest rates, we make holding your vehicle in your business name easy and affordable.

Commercial Real Estate Loans

Are you looking to invest in commercial real estate? You may want to consider a commercial real estate loan. This is a mortgage loan secured for a commercial property rather than a residential property. Commercial real estate is income-producing and used for business purposes. This can include, but is not limited to, retail, offices, apartments, and hotels. If you’re looking to expand your business to new markets by adding another location, renovating your current site, or opening up your first brick-and-mortar location, this loan helps mitigate up-front costs and generate income.

Working with a lender—such as a credit union—to obtain the loan will enable you to receive a customized lending solution. These loan terms are flexible, so you can finance your goals in a way that best grows your business. Discuss with your lender options for personalized rates, flexible financing and payment schedule, and whether your business would benefit from a fixed or adjustable rate. Depending on if you intend to live at your property or not, a commercial real estate loan can either include owner- or non-owner-occupied options so you’re covered either way.

Line of Credit

When considering your loan options, it may be difficult to distinguish the difference between a term loan and a line of credit loan. However, there are a few differences in the terms that distinguish them from each other. Term loans are for a fixed amount that you receive as a lump sum once the loan is approved. They are paid off at regular intervals as part of a loan repayment schedule. Typically, a line of credit loan is more flexible. It’s essentially a credit limit you can borrow against whenever you need it. They are often short-term, and funds can be accessed as needed.

Because a line of credit provides easy access to capital, they’re often used for more immediate revenue-generating ventures. They are specifically designed to act as a quick-start catalyst for business expansion through managing business operations, inventory, and accounts receivable. They can be used to purchase inventory, make critical repairs, and help bridge a cash-flow gap. They are ideal for short-term needs that are essential for growth.

Business Cash Back Cards

Possibly the easiest way to generate income to help grow your business is by opening a business cash-back credit card. Every time you make a business purchase, you can earn cash back. Owning a business necessitates spending. Make those purchases work for you—earn money as you spend it! These necessary and frequent purchases will help grow your business faster.

Look for a card that has zero penalty rates and no fees for cash advances or balance transfers. These cards may benefit your growing business because they can be used as an overdraft protection source for your business checking. They will also issue multiple cards to employees, each with a different limit.

Each business has unique needs to meet its growth goals. Fortunately, there are multiple business loans available to help set you on a path to continued success and growth.

 

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