Choosing the Right Financing Options to Grow Your Business
Before seeking financing to fuel the growth of your business, it is important to lay a solid foundation by defining your strategic plans and carefully assessing your options. By clearly defining your growth objectives and evaluating available avenues, you can confidently pursue financing options that align with your strategic vision and set your business on a path towards sustainable and successful expansion.
A solid growth plan can help you secure the right financing option for your business. It provides a clear roadmap for your business and demonstrates your ability to manage finances effectively, increasing your chances of getting approved for a loan. To learn more, check out our business growth plan template.
There are many methods of financing your business growth, and not all options are created equal. Choosing the right method of financing for your business is crucial for its success. Your selection will impact your business's financial health, growth potential, and overall stability. For example, you could invest in your business with your own money, rely on friends or family, find an investor, or get a loan from your bank.
If you decide to go with a bank loan, there are several choices available, including term loans, lines of credit, and commercial real estate loans. Each financing option serves a specific purpose and caters to different business needs and goals. In the following paragraphs, we will describe each financing option in detail to help you select the right one for your business.
1. Small business term loans are best suited for funding one-time investments such as equipment purchases. A term loan is for a specific amount and typically has a fixed repayment schedule and rate. Term loans can be classified as short-, medium-, or long-term, ranging from six months to ten years.
2. A small business line of credit is flexible, short-term funding that businesses use to cover operational expenses, like payroll, and to manage cash flow. A business can draw on its line of credit for any reason to cover expenses as the need arises, like purchasing inventory, paying accounts receivables, or managing seasonal needs. Interest begins to accumulate only once the business begins using the line of credit. There is a limit, and this is only reimbursed once the balance is repaid.
3. A commercial real estate loan is most appropriate for commercial property owners looking to purchase, expand or renovate, refinance, or prepare for construction costs on their commercial real estate. The loan is secured by the property, which serves as collateral by taking a percentage from the business operating on the property or the establishment that is being built.
For more information about how to choose the right financing options to grow your business, please reach out to a Cambridge Savings Bank business banker today.
We offer tools to help customers learn more about taking out and repaying business loans and lines of credit:
To access all our business calculators, please visit our business calculators page.