Whether you've done a small business start-up, you're buying an up-and-running business, or you're looking to expand your existing enterprise, you need funding. Banks offer several options for financing small business, and one of these may be your ideal source of capital. There are a number of ways that establishing a borrowing relationship with a bank can help your small business grow.
Many Banks are Small Business Administration (SBA) Approved Lenders
The SBA offers a range of loan programs that in essence guarantee a portion of the funds lent to a small business by a local bank. These sources of capital funding can be especially beneficial for a small business owner thanks to their less stringent qualification process, lower interest rates and monthly payments, and flexible terms. Some SBA loan programs even allow a business to finance soft costs such as goodwill, as well as closing costs.
Consider the Advantages of a Bank Line of Credit
The less rigorous application process and flexible borrowing and repayment terms of a line of credit make it an attractive option for a small business; as little or as much of the credit limit can be utilized exactly when it's needed. Typically unsecured, a line of credit lets an owner avoid the risks associated with leveraging personal assets to back a business loan. Their normally fast approval period can be a large benefit for small businesses experiencing a cash crunch.
Your Bank's Business Credit Cards Offer Quick Access to Operating Capital
Both an established small business and a recent start-up can take advantage of this source funding. Even though they usually carry higher interest rates, business credit cards provide an excellent way for owners to create a borrowing history in their business name, which can benefit them down the road when they seek a conventional term loan or other capital funding that requires a proven track record of repayment. Established small businesses may find that a bank credit card provides a convenient funding source to cover day-to-day or unexpected expenses combined with a flexible repayment method.
Term Bank Loans are a Solid Source of Growth Capital
An established small business can use funding from this source for any number of necessary expenditures, from equipment or inventory purchases to leasehold improvements. With a conventional business loan, a business owner will realize savings benefits thanks to lower interest rates and overall borrowing costs across the term. If a term loan is used to finance tangibles, such as business equipment, there are associated tax advantages including depreciation.
Equipment Leasing Through Your Bank Can Eliminate Cash Flow Drain
Many small business owners opt for equipment leasing to preserve their cash flow. Another plus of this type of funding is that used equipment isn't owned at the end of the lease term. This allows a small business owner to stay up-to-date and current on the latest available equipment, so that their smaller operation can compete more effectively with larger entities.
A Bank Bridge Loan Can Span Timing Gaps in Business Financing
Conducting normal daily activities while waiting for new financing approval or a loan closing may leave a small business with a temporary cash shortage. A local bank will often work with an established business customer and arrange a bridge loan to close that gap. Business owners should expect an application process similar to that of a term loan; proof of profitability will be needed.
Obtaining your small business financing through a local bank can aid your growth in the short-term and have a positive impact on your business well into the future.