3 Ways Your Local Bank Can Finance Your Business
Small businesses need financing in order to survive; they must have money to meet payroll and cover expenses while they export their brand and eventually turn a profit. The clearest, safest source of financing for many of these companies is a local bank. Here are the three most common ways in which local banks can fund small businesses and help them not simply survive, but thrive.
1. Small Business Loans
One way for a local bank to finance your business is through a traditional small business loan. Small business loans often come from community banks that support the local communities in which they are located. These banks are cornerstones of business financing around the world. However, their ubiquity makes them a competitive aspect of the finance market in the 21st century. Banks only have so much money that they are able to lend. Therefore, companies have to be smart and sophisticated with the way in which they try to position themselves for a new loan. They must have a detailed business plan that shows the bank how they plan to make money, demonstrating that they will eventually be able to pay off the loan.
2. Lines of Credit
Another method of financing is through a line of credit. A line of credit is an open-ended series of loans that a bank makes available to a company. The company can make limited loans over time and the line will stay open as long as the company maintains a strong track record of paying their bills. Lines of credit are helpful for businesses that are planning to grow and need additional capital over time. They have no hard and fast termination date in most instances. The downside is that these arrangements often also have a variable interest rate. Increases in interest rates can impact the ability of a company to service its debt payments down the road.
3. Business Credit Cards
The third major approach to business financing is a credit card. Banks often issue credit cards to small business owners based on either individual or business credit history. These credit cards sometimes have favorable rates and payment schedules for businesses. They can be used to make all sorts of purchases. Sometimes, those purchases can even be made for free. A business can accrue rewards and receive short-term loans without cost if they make sure to pay back those loans on time.
Credit cards, lines of credit, and small business loans are not easy for all businesses to achieve. They require planning and a considerable amount of work. However, the reward for these achievements is immense. Gaining the support of a local bank can be the one step that a company needs to turn a plan and a dream into reality.