What Type of Business Loan Do I Need?

What Type of Business Loan Do I Need?Getting a business off the ground takes hard work, initiative, and funding. Keeping that business going regardless of what comes your way requires even more dedication—and funding. Small businesses are the backbone of our economy, comprising 99.9 percent of all businesses in the United States, according to the Small Business Association. Non-profit organizations also offer enormous value to our community. Choosing the right commercial banking option for your organization can ensure you have the funding you need now and in the future.

Here’s a look at business loan options, how to decide on a loan product, and how your local community bank in South Carolina can help.

Types of Business Loans

Types of Business Loans

Whether you have a new business, an established business, or a non-profit organization, there are loan products that are designed to meet your needs. The right type of loan for you depends on your budget, your credit, and what type of organization you have. Here are some popular business loan options:

Business Term Loan

This is a “traditional” loan, where your organization receives a lump sum in exchange for monthly payments. This loan is best suited for established businesses and non-profits, but newer organizations may be able to qualify as well.

Business loans typically have a term of one to five years, and the interest rate can vary. These loans can cover a range of business needs, including expansion or purchasing equipment. Some business loans may have a pre-payment penalty, so keep that in mind as you review options.

Longer term loans may be available to assist with real estate purchases or the expansion of existing real estate necessary to support business growth.  Different terms and rates may apply to each situation, and a local banker can be a great asset to help a small business make this most important decision. 

Business Line of Credit

A business line of credit provides immediate funding for your organization. Your organization can access the credit line when you need funding, and then repay what you borrow. For example, if your organization is approved for a line of credit of $150,000, and your organization needs $50,000, you can withdraw the $50,000 and then repay the $50,000 with interest. If another expense comes up, your organization can borrow again, up to the credit limit. 

Both businesses and non-profits can benefit from a line of credit. This form of funding works well for seasonal cash flow issues and emergencies. Most lines of credit are set up for interest only payments monthly and are annually renewable. They can be customized based on the unique needs of the Borrower.

Personal Loan for Business

You can take out a personal loan for business purposes. Some prefer not to go this route due to the intermingling of personal and business funds and that the loan reports to your personal credit rather than your business credit. Newer businesses and organizations that don’t have an established financial history may find it easier to obtain a personal loan, though. Personal loans are usually for lower amounts than you can borrow with a business loan, but the interest rate may be lower as well.

How to Decide on a Business Loan

How to Decide on a Business Loan

Whether you run a for-profit business or a non-profit organization, it’s critical to take the time to carefully review your commercial banking options. To decide on the right funding organization, consider taking the following steps:

  1. Identify what you need and what you can afford. Be specific about why you need funding and how the funds will be spent. Your organization may need funding for a variety of reasons, including expanding into a new location, needing new or specialized equipment, or needing new furniture for the office. Review your organization’s finances and decide how much you can afford when it comes to loan repayment. Any debt you take on should grow your organization, and you should be able to comfortably repay your loan. 
  1. Prepare for loan applications. Business loan applications require documentation. Gather the relevant financial documents from the past three years, including business bank statements, profit and loss sheets, and personal and business tax returns. Keep in mind that your personal credit score may impact your ability to get a business loan, especially if your business is new. Take steps to improve your personal credit, if needed, to improve your chances of approval.
  1. Talk to an expert. It can be difficult to determine which funding option will truly move your organization forward. Consider talking to someone with expertise in business and non-profit lending, such as a loan officer at your local community bank in South Carolina.
  1. Review your options. Take the time to get a few options for funding. Look at the interest rate, the repayment terms, whether there are any fees, and whether there are any prepayment penalties.
  1. Choose the option that works for you. Once you review your options, choose the loan option that makes sense for your organization.

When it comes to business funding, there is no one-size-fits-all solution. A good lender will carefully listen to your organization’s needs and goals, and then connect you with products that meet those needs.

Your Partner in Growth

Your Partner in Growth

At Arthur State Bank, we offer business lending with a personal touch. We are a proud community bank with deep ties to our communities. We’ve been serving businesses and families since 1933, and we’re ready to serve you. Contact us today to find out more about our business lending options.