Business Credit Center

Assess your needs to obtain the right business financing

Business owners should consider their business needs before applying for financing.

Published: August 08, 2016

You may be overwhelmed with the different business financing options out there. From credit cards to bank loans, it can be difficult to decide which type of financing to apply for. But choosing the appropriate type of financing can play a big role in the success of your business. The key is matching the right business financing to your business needs.

Take a look at these typical business expenses and which kind of financing works best to help cover them.

1. Everyday expenses

No matter what type of business you own, you'll likely have to deal with the same everyday expenses: meals, travel, supplies — office and material, etc. Funding these expenses with a business credit card is not only convenient, but it may also help you to build up your business credit profile, especially if you have a young business. Be sure to pay your credit card bills on time every month to protect your business's credit profile and avoid late charges. Before applying for a credit card, carefully review the interest rate, fees, and terms. Also, don't automatically reject credit cards with annual fees. If these credit cards offer perks, such as reward points, concierge service or employee-expense tracking, the fee may be worth its cost.  

2. Maintaining cash flow

Maintaining a healthy cash flow can be difficult for many new businesses. A line of credit can help you pay for short-term needs and typically has a lower interest rate than a credit card. It lets you borrow just the funds you need, when you need them, up to a given maximum amount. For example, when you have to cover a seasonal fluctuation or buy inventory, you can draw money from your line of credit. You can also pay off a line at any time, and you are only charged the interest on the outstanding balance.

3. Funding expansion

If your business has the opportunity to expand, a fixed-term loan may be the right option. Loans offer a lump sum of funds for a fixed term, typically for a specific business purpose. They can be secured or unsecured: An unsecured loan typically has a lower borrowing limit than a secured loan.

4. Purchasing vehicles and equipment

Vehicles and heavy equipment for your business can be costly, so you may want to consider applying for a specialized loan, like the Equipment Express® Loan. This loan provides a flexible way to finance the purchase of new and used business equipment or vehicles. It is secured by the asset you are purchasing.

5. Financing real estate

If you want to purchase property for your business or refinance an existing real estate loan, smart financing can help you get the best return on your property. Real estate loans are typically for a longer term and the interest rate can be fixed or variable. You may also be able to use the equity in your property to obtain an equity loan or equity line of credit.

Now that you understand what kind of business financing might be for right you, determine whether you have the capacity to take it on if you're approved.