Which Loans Should You Use When Growing Your Business
Most businesses develop a working relationship with financial institutions and lenders because of the unique symbiosis of business growth and loans. The fact is, growing cost money and most businesses, even those with significant working capital, typically require the assistance of a lender to acquire new property and expand the organization. Thisachieves two things: (1) it reduces the immediate strain on the business, and (2) it creates an opportunityfor increased cash flow after construction. While growth is beautiful, the lending process can be complicated, especially deciding on which loan is best for your business.
Traditional loans are always a possibility, especially when looking for substantial financing, but these loans are not the easiest to get. Most lenders will review financial history, credit scores andrevenues, but traditional banking institutions will expect these items to demonstrate optimal performance, meaning high revenue streams and top credit scores. Not every business is capable of meeting these expectations.
Small Business Administration
The SBA has the 504 loan program, which is ideal for business growth. This program offers long-term repayment options with fixed interest rates. Additionally, this program was designed with small businesses in mind and does not have the same restrictions as traditional lenders. By guaranteeing your loan, the SBA helps to alleviate the risk to lenders, which opens the door for less than perfect applicants.
If you are only looking for a short-termloan, then a bridge loan may be the answer for you. These loans are designedwith term caps between 6 and 24 months. They allow companies to refinance, restructure or reposition with cash on hand. Additionally, as these loans are short-term loans, the payments are typically lower than more traditional loan programs.
For those businesses looking to expand physically, a construction loan may be your best option. These loans typically come with shorterterms and higher cap limits thanother loans on this list, making them ideal for new builds. As the cap limits are high and the payments may be higher as well, these loans are often reservedfor the more seasoned professional with a proven track record.
Business growth is the desire of most organizations, to avoid stagnation and develop into a corporate leader. Unfortunately,that growth and development requireworking capital which many businesses do not have readily available. Fortunately, there are several options available to helpthese organizations reach their desired potential.