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Which Small Business Loan Is Right for You?

Key Takeaways

  • Small business loans and lines of credit can help with cash flow management as well as cover the cost of expansion or new equipment.
  • Businesses with limited credit history may find better success applying for SBA loans than other loan options.
  • A line of credit can provide short-term liquidity to manage working capital.

Business growth often goes hand-in-hand with new expenses. Getting a small business loan or line of credit can provide you with the financing you need to manage cash flow, cover the cost of an expansion, or pay for new equipment.

Based on your needs, you could opt for small business mortgages with benefits like flexible terms and generous borrowing limits to help you purchase a property, expand, or refinance your current property; or you can consider term loans and SBA loans that can help you purchase assets, including inventory. Small business lending is available with short- or long-term financing options and may be financed with different types of collateral.

Explore the small business financing options below to find out how to get small business credit that is best suited to your business plan.

SBA loans for businesses with special circumstances or a less established credit history

Getting a small business loan for a new business that has limited credit history is typically more difficult than getting a small business loan as a business with an established credit history. However, because SBA loans and lines are backed by the government, businesses with limited credit history may qualify for SBA lending.

There are three types of SBA loans:

  1. SBA Express Loans are typically for businesses that want to improve cash flow, refinance debt, or fund improvements, equipment, or real estate. There are fixed- or variable-rate term loans, as well as lines of credit with borrowing limits up to $350,000. They typically have the easiest SBA application process, quick approval times, flexible terms, and low down payment requirements.
  2. SBA 7(a) Loans are used for starting, expanding, improving, refinancing, or acquiring a business. They feature longer terms and lower down payment requirements than conventional loans. There are fixed- or variable-rate term loans with borrowing limits up to $5,000,000.
  3. SBA 504 Loans can be used to purchase or improve real estate. They are backed by the government and provide the long-term financing needed to purchase a new space, as well as needed machinery and equipment. There are fixed- or variable-rate term loans with borrowing limits up to $12 million.

Use a business line of credit to grow your inventory

Revolving business lines of credit are designed to get you the short-term liquidity you need to manage working capital, with flexible payment options and consistent buying power.

Another option is a loan that acts as a line of credit for a set timeframe — such as 6-12 months — and then later converts to a fixed-term loan. During the first 6-12 months, you can make multiple purchases (computers, machinery, vehicles, etc.) and only pay the interest on what you borrow. Once that draw period ends, you make payments on the principal and the interest. This is sometimes referred to as a flex loan.

More information

We are committed to helping your business reach its potential. Our dedicated business banking professionals can help you find the right product to meet your business’ needs. To learn more about small business loans, please call 1-800-428-7463, visit us online, or visit your nearest Citizens Bank branch.

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