What Financing Options Are Available to Small Business Owners?

by Debi Enders

So you are thinking about expanding your business. Or, perhaps you’d like to refinance your debt or make some other change that requires more money than you currently have available. How you finance your plans will depend on many factors. Here are a few options.

1. Business Credit Card – If your funding needs are small, a business credit card can be a fast and easy funding solution – especially if you need regular access to credit. Business credit cards typically have higher spending limits and lower interest rates than personal credit cards, and many offer attractive introductory offers and reward programs as well.

2. Term Loan – If you have good credit, seek to borrow money for two or more years and want a predictable monthly payment, a traditional term loan may be a better option. Term loans allow you to borrow a fixed amount of money for a specific purpose, which you pay back over a fixed term at a set interest rate. Term loans can be a good choice for refinancing debt, working capital and business expansions.

3. SBA Loan – Another option for long-term, low-interest financing is a Small Business Administration-guaranteed loan. Keep in mind that the SBA doesn’t actually make loans, but guarantees those made by an SBA-approved lender. While loans of up to $5 million are possible, SBA also backs microloans of less than $50,000, among other alternatives.

4. Business Line of Credit – This is a good option for businesses with unpredictable or seasonal needs, or want a ready source of cash for emergencies. A line of credit gives you access to a defined amount of money to draw on as you need it. You only pay interest on what you use. Once repaid, you can borrow them again.

Not sure how to proceed? Your banker can help you sort through your options and determine which one is best for you.

Debi Enders (debi.enders@commercebank.com) is vice president, small business banking at Commerce Bank.