One of the cardinal rules of business – large and small alike – is the classic phrase: “you need to spend money to make money.” Chances are, whether you’re a business owner or not, you’ve heard this age-old idiom at one point or another, and that’s because it’s true.
Every business has expenses it needs to cover. From paychecks to inventory to rent, business owners have a laundry list of costs they must incur, and sometimes, they need a little help. This is where business loans and lines of credit can be helpful. Whether your business requires a steady stream of cash flow, or a lump sum for a larger expense, these financial services can provide opportunities to expand your business.
Before applying for a business line of credit or loan, it’s important to understand your needs and options. Amerant Business Banking experts, Luis Cure and Brian Guilford, have got you covered.
Loan vs Lines of Credit
First, it’s important to understand the difference between a business loan and a line of credit. What are they and how are they different?
Luis Cure, Amerant’s Business Banking Team Lead for Broward and Palm Beach markets, calls a business line of credit “a revolving credit line that can be used when a business needs access to capital multiple times over.” Similar to how credit card payments work, a business line of credit can continually be accessed once paid off. However, it’s important to note that business lines of credit don’t work exactly the same as credit cards, as they offer much more competitive rates than credit cards typically do and are usually used for smaller purchases rather than larger expenses, which a line of credit could help you cover.
On the other hand, business loans offer a different kind of flexibility for business owners. “A loan is a structured credit facility that is set for a definite amount of time and is usually paid off in monthly principal and interest payments,” says Cure. The difference here from a line of credit is that the loan will not replenish each month, making the loan a lump sum of capital you can access and pay back periodically.
Understand Your Needs
Businesses vary greatly in size, scale, type and service, so not every business loan or line of credit is right for everyone. “Amerant offers many different options for all kinds of businesses, so there’s something for everyone,” adds Cure.
Brian Guilford, Business Banking Relationship Manager at Amerant Bank, says step one is to meet with your relationship manager and assess your needs. What are your business goals? What are you trying to accomplish? Being able to answer those kinds of questions are essential in understanding what solution is right for you.
“A line of credit, for example, can provide businesses a solution they may need when times are uncertain, or when revenues or expenses are difficult to predict,” says Guilford. “However, you could simply just use one for working capital needs.” A line of credit is typically very flexible, which is its greatest strength.
Loans can be a great resource for businesses that are growing rapidly. “A loan would be ideally suited for a client who has outgrown a space that they rent, or if they’re looking to purchase a property for that business. An Owner-Occupied Real Estate (OORE) loan is great for that purpose,” Guilford adds.
With direct access to the Amerant’s relationship managers, business owners can provide business insights the bank needs to know to help clients accomplish their financial business goals. To learn more about Amerant Bank business solutions, visit amerantbank.com/business.
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