As a small business owner, we know that you’re always looking for ways to get better financing to help your business succeed. Many business owners, especially those of small businesses and startups, are looking to figure out how to get a business line of credit.
Just like your other business decisions, there are different options available to you, each with their own pros and cons. Line of credit? Equipment leasing? Business financing? Which one is going to be the best for you?
Line of Credit vs. Business Loans vs. Equipment Financing - Which Is Best?
Unsurprisingly, every business you talk to will try to convince you into thinking that they’re the “best” option, often times before they even know what the financial situation is of your business. So when you’re in desperate need of funding, you’ve got to find the best solution, not the first that shows up.
Line of Credit
Why get a line of credit? Lines of credit is ideal for businesses that don’t need a huge lump of cash all at once, but know they will need funds consistently and in a recurring fashion. This is often great for businesses that need to sustain business development, but haven’t gotten profit to match up with their business growth or customer demand.
Unlike other business funding options, Most line of credit options allow you to pay off the balance that is due at any time that is convenient for your business, without having to pay an early payment penalty and just pay the remaining principal left on the line of credit.
Small Business Loan
If instead you need a more significant amount of upfront capital, then a line of credit may not be ideal. If you’re making a large business expansion or looking to start a business from scratch, larger capital comes in handy. Small business loans meet this need and has a defined start and end time for its term.
This allows businesses to better plan their finances, knowing exactly how long their loan lasts and how much they will need to pay each month to pay it off. You may or may not be able to get away with making prepayments without a penalty, but it will depend on who you get your financing from.
Equipment financing is another alternative to getting a line of credit with bad credit. Equipment financing isn’t ideal for owners that need to cover certain business expenses, but can be great for businesses that only need to cover the costs of purchasing or upgrading business related equipment. In fact, some of the best financing options come directly from an equipment dealer.
Sale Leaseback is another alterntive to getting a line of credit with bad credit. If your business owns heavy equipment and other hard assetts like trucks and trailers. You can sell your equipment to an equipment financing company for typically 50-70% LTV on terms from 24-36 months. As an example, if you’re looking at a $50K sale leaseback, your monthly payments can be $1.2K for 5 years if you have good credit. If you have less than good credit, you might end up having to pay twice as much for the same amount of funding.
The Best Financing Option for Your Business
There’s no one tried-and-true method of financing. There are many factors that go into determining whether or not a type of financing is ideal for your business. Generally speaking, as long as you have been in business for a while and have decent credit, you can get the best financing from a bank.
Not everyone has that privilege, which makes a sale lease back and equipment financing a great alternative. Knowing how to get line of credit can help for both short term and long term financial applications.
Ready for a free Line Of Credit Financing quote? Click the link below! or Call us at 866-458-4777