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Small Business Credit
Understand your options and then contact your local financial institution to discuss your needs. These pages are developed on an ongoing basis. Please revisit or bookmark, for updates.
| Line of Credit (1) | Term Loan (1) | Credit Card | Lease | Commercial Mortgage | |
|---|---|---|---|---|---|
| Approx. Loan Ranges | $10,000 - $250,000 | $10,000 - $250,000 | Up to $50,000 | $5,000 - $250,000 | Up to $250,000 |
| Common Repayment Terms |
Revolving -
as principal is paid down, the available balance increases |
Term -
1 to 7 years |
Revolving |
Term -
2 to 5 years |
Term -
1 to 20 years |
| Interest Rate Approaches | Variable, based on financial institution's prime rate + a margin | Variable, based on financial institution's prime rate + a margin, or fixed |
Variable rate:
• Prime + a fixed % for purchases (2) • Prime + a fixed % for cash advances (2) |
Fixed, based on term, equipment cost and end of lease purchase option | Variable, based on financial institutions prime rate + a margin, or fixed |
| Fee Structures |
• A nominal application fee (Usually under $100 and applied to processing / commitment fees)
• A processing / commitment fee (Usually a % of the line of credit amount) • An annual fee (Usually a % of the line of credit amount) |
• A nominal application fee (Usually under $100 and applied to processing / commitment fees)
• A processing / commitment fee (Usually a % of the loan amount) |
• Annual nominal fee per card
• Cash advance fees apply typically a fixed % or a fixed dollar value |
• A nominal documentation fee for requests up to or around $50,000
• A slightly higher fee for requests from or around $50,001 to $250,000 |
• A fixed % of amount borrowed |
| Monthly Payment | A fixed % of principal balance + interest; minimum fee applies on lines of credit (3) | Principal and interest | A fixed dollar value or a % of outstanding balance depending on which is greater | Monthly rental | Principal and interest |
| Payment Method | Payments automatically deducted from business checking account or by check. A higher interest rate may be applied without an automatic payment deduction. | Payments automatically deducted from business checking account or by check. A higher interest rate may be applied without an automatic payment deduction. | Payments by check or via a link to a 24-hour access check card with payments made through an ATM, online banking service, or by phone. | Payments by check | Payments automatically deducted from business checking account or by check. |
| Benefits |
• Advances made directly into business checking account
• Typically no annual documentation requirements (4) • Revolving available balance because as principal is paid down, the available balance increases |
• Offers convenient fixed payment schedules
• May range from 1 to 7 year terms |
• Card accepted wherever card type is honored
• Cards may be made available for employees with a preset monthly spending limit • All cardholder charges can be summarizing on one monthly invoice |
• Offers equipment ownership and trade-up options
• Provides fixed rate financing |
• Rate options may be fixed or variable
• Interest is tax deductible |
| Use of Funds |
• Working capital
• Seasonal cash flow • Inventory • Business expansion |
• Renovate facilities
• Equipment purchases • Business expansion/permanent working capital |
• Purchases
• Cash advances |
• Obtain equipment
• Upgrade equipment |
• Buy a building
• Refinancing • Expanding • Rehabilitating |
| Collateral | Secured or unsecured | Secured | Unsecured | Secured | Secured |
(1) Lines of Credit and Term Loans may require that a business checking account also be held at the same financial institution
(2) Additional rates may apply if account is not paid as agreed (Return to Variable rate: credit card)
(3) Lines of Credit greater than $100,000 will have monthly payment terms defined on a Applicable on a case by case basis
(4) If no additional paperwork is required (Return to Benefits)
(2) Additional rates may apply if account is not paid as agreed (Return to Variable rate: credit card)
(3) Lines of Credit greater than $100,000 will have monthly payment terms defined on a Applicable on a case by case basis
(4) If no additional paperwork is required (Return to Benefits)
# # #
Note: This information has been compiled by the Knowledge Institute for Small Business Development (KISBD) for educational purposes only in order to convey a general overview of the options and related services available to small businesses in the subject areas introduced. Content is provided on an "as is" basis and is not intended to be an exhaustive representation, nor does it provide advice or create a customer relationship between KISBD and its sponsors, buzgate.org, its affiliates and any other organization named herein, and any reader.
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