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4 Types of Commercial Loans for Growing Your Business

We know that cash flow rises and falls when it comes to your business. Sometimes a commercial loan is what you need to move your business forward, whether that’s so you can hire more employees, make improvements to your store, or buy new equipment.

But which loan is right for you? First Independent Bank offers various commercial loans to keep your business thriving. Here’s everything you need to know about the four most common business loans.

Line of Credit 

Think of a line of credit more like a credit card than a traditional loan. A line of credit is not designated for a specific purpose or item but is used for short-term cash flow needs to cover operating expenses until income or receivables are collected, normally in the same 12-month period.  The main difference is that instead of receiving a large sum of money upon signing, you can withdraw cash as you need it up to the amount you’ve been approved for, just like a credit card. A line of credit is an excellent option for short-term financial solutions such as payroll or increasing inventory. Lines of credit are subject to annual review and renewal and can include a fluctuating interest rate. 

Commercial Real Estate Loan

If you’re looking to purchase a building for your business, a Commercial Real Estate Loan might be right for you. Commercial Real Estate (CRE) is considered any property solely used for generating income and has no residential purposes. CRE Loans are similar to individual residential mortgages, except they are given to a business entity and have shorter loan terms and amortization that lasts longer than the life of the loan. CRE loans are a great option if you’re looking for fixed monthly payments over renting or looking to invest in property to raise your equity.

Equipment Loan

Equipment loans are specifically designated for equipment and machinery that are essential for running your business. This could include commercial vehicles, office furniture, computers & software, phone systems, manufacturing equipment, construction equipment, medical equipment, veterinary equipment, or farm equipment. At First Independent Bank, we work with many farmers to help them purchase new or used agriculture equipment.

SBA 504

The U.S Small Business Administration (SBA) CDC 504 Loan program provides small businesses with long-term, fixed-rate financing to borrow money at low, fixed rates and high amounts These loans are given to small businesses for fixed assets such as buildings, building improvements, or to purchase long-term machinery and equipment. Business owners can be eligible if they meet the SBA size and income requirements. Loans are made through a partnership with a non-profit Certified Development Company (CDC) and a private lender. They are typically structured where CDC provides 40% of total project costs (and the SBA guarantees that portion of the loan), the lender covers up to 50% and the borrower contributes 10-20%. These loans can be great for obtaining owner-occupied real estate. (The owner must occupy 51% or more of the property depending on the type of loan.) There is no total maximum project loan amount, but the maximum SBA loan amount is $5 million (Certain energy projects or small manufacturers may qualify for up to $5.5 million.) Loan repayment periods are 10-25 years.

You can build your business with an SBA 504 loan from First Independent Bank.

 

Whether you are expanding your operation or increasing your working capital or operating funds, First Independent Bank has business loans to meet your needs. Our experienced lenders can offer sound advice and competitive interest rates for all types of business loans. Speak to a banker to learn more!

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