What You Need To Know About Small-Business Loan Options

Is your business modernizing equipment to improve output? Expanding into a new location? Aiming to improve its cash flow or working capital position?

Outside funding will likely be a crucial factor in achieving these goals, and many more.

Small-business loan options can empower you to take advantage of a wide range of opportunities. There are many lending options you can consider as a small-business owner, like a term loan or a line of credit. Each type of bank loan or financing option can involve a different structure, payback schedule, interest rate, and range of intended uses.

Keep reading to learn about common types of business loans that might be right for you.

The basics of business loans

Before you start the small business financing or loan process, you should first identify a need within your company. Few, if any, lenders will approve a loan application without a clear reason why the funds you request are necessary.

Documenting the intent of the loan is not just a lender requirement—it’s also just a sound idea for your business planning. This documentation might include how the small-business loan will be used, the benefits you expect it to bring to your company, and how you will pay it back.

A lender may require a personal guarantee for some business loans, such as Small Business Administration (SBA) loans. So make sure you have the personal assets needed to guarantee a loan or business financing if the need arises.

You should also consider how your business and personal credit score could affect your prospects for a loan.

It’s standard for lenders to check a business credit score as part of the application process. If you operate a sole proprietorship or single-member limited liability company, your personal credit score can become a factor in a lending decision. Bad credit can make it more difficult to secure a loan.

However, community banks such as Adirondack Trust take the time to consider the context behind a low score, using a more holistic approach that takes unique circumstances into account.

Types of available small-business financing and loans

You can secure the funding that fits your company’s specific needs by diving into the differences between available small business financing and loan options.

The following business loans are currently available through Adirondack Trust:

Term loan

A term loan is paid out in a single, lump-sum disbursement and paid back over a longer period of time—up to seven years. They can be secured or unsecured, depending on the specifics of each application.

This loan option is valuable for business acquisitions, equipment purchases and similar situations in which a large amount of funds are required to move forward. Term loans can also be valuable for restructuring debt and establishing a source of working capital.

SBA loan

The SBA offers a variety of business loan products for small businesses in concert with local lenders. In most instances, an SBA loan offers low down payments, a manageable interest rate and flexible terms. Specific options include:

  • SBA Express loan: Featuring a shortened approval timeline for the SBA, a maximum of 36 hours. The maximum SBA loan amount for this product is $350,000.
  • 7(a): SBA 7(a) loans can be seen as a general purpose business loan. This loan type is the basis for many of the other, more specialized options from the agency and among the most common SBA loan types we approve.
  • 504: The 504 loan program is built on providing fixed-rate financing in the long term, specifically for fixed assets that support business growth and the creation of jobs.
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Business line of credit

A business line of credit is similar to a credit card, in that this type of financing is used as needed.

Instead of a lump-sum disbursement, your business can access funds up to the established credit limit and then pay back the amount owed over time. That makes a business line of credit an effective way to:

  • Increase working capital.
  • Improve liquidity and cash flow.
  • Fund inventory and receivables purchases.
  • Generally address short-term financial needs.

Adirondack Trust offers lines of credit designed especially for small businesses.

Real estate and commercial development loans and financing

Construction and development financing can be used to fund commercial construction as well as infrastructure improvements for a variety of projects. That includes multi-family apartments, subdivisions, warehouses and mixed-use facilities, among many other options.

Commercial real estate loans can help your business secure a mortgage for a piece of commercial property. Loans are available for a wide range of property types, such as office buildings, retail centers and plenty of others.

Applying for the right type of small-business loan

Business loan application requirements can differ from one loan or financing option to the next. Some types of documents are frequently requested, though.

For established businesses, loan officers often need to review historical financial statements to better understand a company’s operations and level of stability. Understanding exactly what a company does is necessary before a loan or financing is offered. You may also be asked to share a business plan.

Asking your loan officer exactly what documentation is required is a smart choice—but far from the only topic that you can raise during a conversation. A competent and experienced loan officer should have the ability to address all types of relevant questions, from an inquiry about an interest rate to a more detailed explanation of business financing. They should also confidently steer you toward the loan or financing product that best addresses your business needs.

Finding a dependable local partner

The lending and financing team at Adirondack Trust has deep experience and broad expertise related to small-business loan options. Our loan officers take the time to get to know each applicant, providing valuable guidance and support throughout the lending process. Each and every loan specialist works locally, which means they possess a deep understanding of the Saratoga region’s economy and the ability to more quickly make lending decisions.

To learn more about business loans and financing through Adirondack Trust, review our available options or get in touch with us today.