If you’re opening a small business, you’ve probably realized that there are a lot of expenses to consider. You might need to buy equipment, hire employees, or even rent office space. These costs can add up very quickly, so it’s important to plan ahead and make sure that your business is financially prepared for the future. Luckily, there are several financing options available for small businesses—and each one comes with its own advantages and disadvantages. If you’re considering applying for a loan or line of credit from your bank in order to fund your operations and growth, here’s what you should know about each option:
Business loans are the most traditional financing option for small businesses. They are usually long term, require collateral and have low interest rates. Business loans are used to fund large purchases or funding gaps in your business plan.
Lines of credit
A line of credit is a type of revolving credit. It’s a form of short-term financing that allows you to borrow up to your credit limit at any time, and pay back the amount you borrowed on a monthly basis with interest.
A line of credit gives you access to funds as needed, but it also means that there are no penalties for not using all the money in your account each month–a feature that makes them ideal for small business owners who don’t require much capital but may need it at some point during the year.
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