Starting a business comes with many unknowns – it’s important to understand where and how to leverage bank money. There are 32.5 million small businesses[1] in the US, which make up 99.9% of all businesses, and they all need funding

For small businesses, it often comes down to two choices: a business loan or a line of credit.

But how do you know which loan type is right for you? Here’s an easy way to weigh the pros and cons.

The Small Business Administration (SBA) loaned more than $44.8 billion in funding to small businesses in 2021.[2]

  What’s a Business Loan?

A business loan is a one-time loan for a single business expense or project. These could range from a small, short-term loan for general business expenditures to a large, long-term loan for a big purchase such as heavy equipment or purchasing real estate.

We offer a range of small business loans, commercial real estate loans, and vehicle finance loans.

Business Loan Pros

  • You'll often pay lower borrowing costs and interest rates.
  • You can take out a one-time loan with a preset monthly schedule.
  •  It boosts your cash flow instantly.

Business Loan Cons

  • There’s a lack of flexibility; you generally can’t change terms.
  • You can only use them for one-time expenses.
  • Multiple purchases require multiple loans.
  • The process and funding can take longer than a line of credit.

  What's a Line of Credit?

A line of credit (LOC) is a type of loan with both revolving and non-revolving preset borrowing limits that can be used at any time.

Revolving means a customer can take money out, as needed, up to the line's limit. As the money is repaid, their balance reduces, and more funds become available – much like a credit card.

Non-revolving LOCs mean you can only borrow once on the same line.

We offer secured and unsecured lines of credit that can help you cover short-term business needs.

Line of Credit Pros

  • You’ll only pay interest on what you use
  • You can borrow what you need, up to the credit limit – then repay and reborrow as needed.
  • There’s no expiration date.

Line of Credit Cons

  • You may pay higher costs and fees.
  • There’s no fixed repayment plan for money borrowed.
  • You may have lower borrowing limits than loans (though it may be higher than credit cards)

  Okay, I know which option I want. How do I apply?

  1. Determine how much you need and what you can pay.
  2. Check your bank to see what you’re eligible for (or compare lenders).
  3. Prepare your paperwork, personal information, and financial statements.
  4. Apply!