Whether you’ve been in business for decades or are just starting to get off the ground, there are financial options that can help your business grow. Lenders offer several different loans specifically for business needs. To get started, simply ask yourself what your business needs to grow. Are you looking to increase your accounts receivable base? Do you need new equipment? Are you ready to open a storefront after operating online? Are there limitations to how you can use a business loan?
The experts at Riverview Bank can provide the details. Keep reading to find out more about how you can use business loans in Oregon and Washington.
What Are Some Types of Business Loans, and How Can They Be Used?
Business loans aren’t one-size-fits-all. Depending on your needs and goals, one type of loan may be more appropriate than another. Do your due diligence and make sure you pursue the right loan for your business so that you can get the most out of it. Below are some of the most common types of small business loans and a few details about each.
No matter which loan seems best for your business, keep in mind that exact terms, qualifications, and rates will vary depending on the lender.
Small Business Association (SBA) Loans
SBA loans are government-backed loans. The Small Business Administration is a federal agency dedicated to helping small businesses thrive. It’s designed to help established businesses grow and new businesses get started.
SBA loans can be easier to qualify for when it comes to small business financing options. These loans may also have lower down payment requirements, longer loan term options, and reduced collateral requirements. Naturally, the specific qualifications will vary based on the lender.
SBA loans are distributed as a lump sum and can be used toward construction, purchasing equipment, expanding to new locations, buying out a partner, and more. There are different types of SBA loans, including 7A loans, which are backed by the SBA but issued by private lenders such as Riverview Bank.
Business Line of Credit
A business line of credit operates differently than a lump sum type of loan. Think of it like a credit card for your business. You have an approved lending limit, but you only pay interest on the amount of money that you borrow. Lines of credit can typically be used for working capital and operational purposes.
Some business owners prefer a line of credit because of the flexibility. This loan option is ideal if you don’t know the exact amount you need to borrow or unexpected expenses pop up. The flexibility also makes a business line of credit a good choice for seasonal businesses.
Term Financing
Term financing is one of the most common types of business loans. That’s partially because they can be used for a wide variety of purposes, including equipment and building purchases, asset and inventory purchases, and covering everyday costs of operation. With term loans, a business receives a lump sum of cash up front and then pays it back, along with interest, over a fixed term.
Term financing is usually best for businesses that have been around for at least two years. If you’re trying to start a business, an SBA loan or line of credit may serve your needs better.
Real Estate Financing
Real estate loans help you grow your business by purchasing land or buildings. It can be used for properties that are owner-occupied and non-owner-occupied, for new construction, and for renovation work.
Equipment Loans
Purchase the equipment, tools, or machinery your small business needs to reach its full potential. “Equipment” can refer to machinery necessary for the job, appliances, shelving and displays for storefronts, company vehicles, computers, and even office furniture. The equipment that you use this loan to purchase is the collateral.
How to Leverage a Business Loan for Cash Flow
One major reason businesses apply for loans is to improve cash flow. Many businesses need assistance with the cash conversion cycle. A working capital loan is a way to secure short-term financing.
One business loan type used for cash flow is a working capital line of credit. This loan is best for businesses that have unpaid customer invoices that they can use to collateralize a line of credit.
How to Leverage a Business Loan for Growth
In this situation, you would take out a loan and use it for longer-term moves like hiring more people or stocking more inventory. Using a business loan for growth will provide a more significant return on investment in comparison to leveraging a loan for cash flow.
This option is usually cheaper than using a loan for cash flow as well. If you are confident that your business can sustain itself through periods of low cash flow, this may be your better option. Ultimately, it always helps to consult with a business loan expert to determine whether leveraging for cash flow or for new growth is the wiser move.
How Do I Apply for One of These Business Loans?
To apply, you’ll need to provide a lender with certain information. For instance, you may need to share your credit score. Other information and documents include:
- Your personal information as business owner (including name and address)
- Business name, address, and phone number
- Tax identification number
- Industry
- Number of employees
- Years in business
- Annual revenue
- Estimated monthly expenses
- Important documents such as business plans, tax returns, and financial statements
Visit Riverview Bank’s business loan page to learn more about our business banking loans in Washington or Oregon. We have been serving the Pacific Northwest for over 100 years. We’re a part of the communities with our clients, so of course we want to see businesses succeed. Talk with a business loan relationship manager or a branch manager to find out more about the available solutions today.