Three Small Business Debt Options for Securing Finances

If you want to operate a small business, you’ll need some ready cash. You’ll want to look at the various options for raising funds and see which one makes the most sense. A small business loan might be the best option in many cases. Here, you’ll find Credello’s recommendations for personal loans for your business.

1. Business Line of Credit

A business credit line is a loan you get from a bank, credit union or other financial institution. You might have a business that is already operating and need some cash to maintain it. Or maybe you haven’t started your company yet and need some cash to get it off the ground.

In the first scenario, you’ll need to show the lending entity documentation that gets them up to speed on your finances. In the second instance, where you haven’t gotten your company off the ground yet, you’ll need to create a detailed business plan to show the lender.

If the bank/credit union gives you a line of credit, it will only be for a certain amount. You can draw as much as you want from the line of credit by writing checks. As with a credit card, you’ll owe the lender interest on the money you use from that line of credit unless you pay it back expediently.

2. Commercial Real Estate Loans

Commercial real estate loans, also known as CRE loans, allow you to use an existing commercial property, such as an office, retail location or hotel, and place a lien against it. A bank or credit union will usually send an assessor to inspect a property and determine its value. If the lender approves your loan, they will give you a loan amount based upon that assessment.

The loan money can usually be used to fund any business activity. The contract might stipulate certain things you can and can’t spend the money on.

3. Term Loan

Term loans are common small-business loans. To qualify, your lender will generally look at your credit rating, your company’s history, or your business plan if the company doesn’t yet exist.

If the lender finds your company or idea viable and feels you’re a strong candidate to pay them back based on your credit rating, they’ll extend you an offer, which you can accept if you agree to the terms. You will then pay the lender monthly plus interest for a agreed-upon amount.

Many business owners find this an attractive loan type because you don’t often have to put up anything as collateral to secure it. These loans are written in a way that allows for a lot of flexibility as to what you can do.

There are many options for small business loans

If you’re going to start a small business or have an existing one, and need money, several loan options exist. It is important to choose one that suits your needs.

Term loans are the most popular type. Tell a bank or credit union what your business is and present a business plan. If approved, they will give you a loan. You pay it back monthly with an agreed-upon rate. A commercial real estate loan lets you apply for financial backing using a commercial property’s assessed value as collateral.

Business credit lines function in the same way as credit cards. You are granted a certain amount by the lender and can use that money for business purposes. You’ll pay interest on any money you use from the line of credit if you carry the balance from one payment period to the next.

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