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Meeting your small business cash needs can be challenging. When it comes to financing, one of the many options is small business bank loans. Many banks will offer both traditional loans and lines of credit. Each provides different benefits and is better suited for certain types of businesses. Here’s how to figure out which one is right for your company:

Traditional Bank Loan
A small business loan from a bank will allow you to borrow a specific, fixed amount of money that must be paid back over a predetermined amount of time. Often the loan is amortized so that a large “balloon” payment is due at the end of the term. How much you can borrow with a bank loan is determined by the reason for the loan.

Interest rates are often slightly cheaper on small business loans as they are a little safer for banks. They are most commonly fixed rates for the life of the loan. Some form of collateral is usually required – it could be anything from business machinery to inventory to the owner’s house.

Bank loans offer substantial financing with some of the best interest rates, but not much flexibility in repayment terms.

Line of Credit
A small business line of credit allows a company to borrow money up to a certain amount on an as-needed basis. It is much more like having a credit card account than a traditional bank loan. With a line of credit a firm can choose how much of the loan to spend each month and the repayment schedule is based on how much of the loan has been used.

Interest rates on lines of credit tend to be a little higher than on regular bank loans because of the uncertain nature of the monthly payments. A business may have even higher rates if the line of credit is unsecured by personal or company assets. Line of credit rate are also usually adjustable rates that can vary from year to year. These types of loan can also be reviewed each year and the bank can decide whether or not to call in the loan during that time.

Lines of credit are a nice options for companies whose business expenses vary dramatically from one month to the next. They offer great repayment flexibility but come with more risk and slightly higher price tags.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources