Small Business
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How Credit May Help Your Business Grow

As your company expands, wise use of credit may help you ease the path to success.

Your business has been booming and now you're ready to fuel its growth. According to the Small Business Administration, about three-quarters of young firms use a loan, a line of credit, a business credit card or a combination of these funding tools to meet their goals. Here is an overview of each one.

Loan

A conventional, or term, loan is appropriate if you need to borrow a set amount to expand your business. Typically businesses use loans to finance long-term assets such as new office space, equipment or computers. Make sure that the term of the loan isn't longer than the useful life of the asset. For example, don't take a five-year loan for a computer you will need to upgrade in three years.

The rates on a loan can be fixed or adjustable and, depending on your business and your needs, are typically issued for anywhere from $5,000 to $3,000,000 and for up to seven years. At the higher end of the range, you would need to secure the loan with collateral such as equipment or fixed assets.

Line of Credit

A line of credit is extremely useful when your borrowing needs vary. This is often the case when your business has a cyclical nature (tax preparation, for example) or if you need to hire temporary workers to staff a business a peak. A line of credit allows you to borrow up to a set amount, pay off all or part of the loan, and then re-borrow the funds without reapplying for the line of credit.

Unsecured business lines of credit are typically available for up to $100,000. A line of credit for more than $100,000 is usually secured with commercial or residential real estate.

Business Credit Card

A business credit card is held in the name of the business. Owners and employees are authorized to use associated cards to pay for business costs such as travel expenses. A business card is suitable when you need immediate access to short-term funds. It gives you the flexibility to pay of the entire balance in full each month or to pay the balance over time. A benefit of using a business credit card is that it's widely accepted and easy to use.

Speak with your banker to determine which funding option or combination is right for your business.

 


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