Having access to capital is important for any growing business. Whether you’re looking to increase inventory, invest in infrastructure or just keep your business afloat, here are a few options to help you determine what type of business loan is best for you and your company.
Long-term loans are one of the most common types of loans distributed by large commercial lenders and are often used for business expansion, refinancing, acquisition, or working capital. Long-term loans are usually repaid monthly and tend to have lower interest rates than short-term loans. Generally, long-term loans are easier to obtain if you have a well-established business or an up-and-coming business with a strong growth plan.
Unlike long-term loans, short-term loans are to be repaid, in full, at the end of the agreed term. Short-terms loans are usually used for shorter term needs such as raising cash for accounts payable, building inventory, or completing small projects that yield quick returns. Short-term loans are particularly useful for seasonal businesses, like retailers, and are issued by banks.
Make A Plan
Once you’ve determined the type of loan that best suits your business’s needs, you should develop a finance plan. Here are a few helpful tips to help you prepare for the process of obtaining a loan.
- Identify sources of requested and existing funds.
- Outline how these funds will be used.
- Provide any business audits you may have, as well as interim financial statements that show positive cash flow.
- Understand your credit score – if your credit score is low, be prepared to explain how you are going to tackle this problem.
- Determine the overall value of your business.
The foregoing information is provided by City National Bank (CNB). Unless otherwise stated, opinions expressed are those of the respective authors and not necessarily those of CNB. The information is provided without warranty and no recommendation or endorsement by CNB is intended or should be inferred unless specifically stated.
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