As a business owner, you are constantly analyzing opportunities that will aid your business in both the short term and the long term. Access to capital is often a critical aspect of engaging in new opportunities for well established companies, activating a new startup, or maintaining cash flow during periods of tremendous change.
Unfortunately, there are many banks and lenders that offer short term funding opportunities that are accompanied by high interest rates and undesirable policies. In this article, we offer insight on the things that your business can do to secure short-term loans while reducing your risk of debt and maintaining a strong business credit rating. As you analyze opportunities, ensure that each decision you make allows your business to be agile, flexible, and secure, both now and in the future.
Corporate Lines Of Credit
As you likely have learned with your personal finances, building a strong line of credit takes time and discipline. In order to continue getting higher credit limits in the future, it is important to maintain a strong credit score and make timely payments. In periods of transition or growth, the majority of companies rely on corporate lines of credit and short term loans to maintain their working capital. Access to immediate funding can ensure that you have money if an unexpected emergency arises. In addition, it allows your business the flexibility needed to take advantage of opportunities for growth and expansion.
Most corporations take advantage of revolving lines of credit. This allows businesses to receive funding as needed, rather than receiving a lump sum up front, giving owners more autonomy over the money that is being utilized. When determining your bank partner, you must ensure that the designated bank will not apply unnecessary fees or enact low borrowing limits.
Construction Financing Opportunities
For many businesses, rebuilding or launching a brick and mortar location is a key aspect in a growth strategy. Securing a real estate property often allows companies to build their reputation. However, building or occupying a new space can be an intimidating endeavor. In these situations, construction financing helps businesses access the resources needed to complete their project in a timely fashion. This type of short-term loan is specifically allocated to companies that are developing a piece of real estate, and it is strictly tied to the construction phase.
Because of the restrictions of construction financing, it is best to secure this type of funding when you have a realistic understanding of the time and money needed to get the project to completion. Another long-term option that companies consider applying for is a traditional mortgage. However, mortgages are long-term investments that span across 15-30 years. The average timetable for construction financing is significantly shorter.
Short-Term Loan Agreements
Securing a short-term loan for your business can provide financial security. Not only can short-term loans be approved quickly for use, they are typically paid back in under two years. Because this type of loan can be approved quickly, it allows companies to stay up to date on payroll, invoices, operating expenses, and emergency situations.
In addition, there are often fixed financing options that allow businesses to repay these loans without high interest rates. When determining what type of loan is best for your business, it is important to consider your current credit score, your predicted timetable for repayment, and your forecasted annual revenue.
Business Credit Card Options
If you are able to maintain a high credit score and timely payments, a business credit card is a worthwhile idea. Similar to lines of credit, business cards allow companies to continue to grow and strengthen their credit score. This continual growth will allow your company to access higher credit limits as time goes on. Even if you are operating your business independently, it is worthwhile to consider getting a business credit card to help separate professional and personal expenses.
In addition, having quick access to all corporate expenses will be helpful during tax season. Before adding a business card to your wallet, it is important to understand the ways that this spending card functions differently than a personal credit card. For starters, the approval of a business credit card relies on the financial history of both the business owner and the business itself.
Secondly, there are different restrictions, rewards, protections, and spending limits between the two types of cards. There are a variety of different benefits depending on the type of business card you want. Some offer cash back opportunities, others eliminate annual fees, and some are specifically designed for certain types of companies.
Securing a short term loan for your company can be an exciting opportunity! This funding will allow you to maintain operating expenses during challenging times, invest in real estate endeavors, or agree to opportunities that require higher initial investments.
Before securing short term funding, it is important to ensure that your business has the forecasted revenue needed to pay back the loan on a condensed time frame. In addition, it is important that you only get the funding needed to complete the initiative at hand.