Owning and managing a business is a dream for many people. For small business owners, a lot of very important decisions need to be made on a regular basis. One important decision to make is whether or not they should apply for business loans. Business loans can help a small business a number of different ways. These loans can help a business to manage cash flow, buy equipment, and even purchase real estate. There are several types of business loans that you should consider applying for and taking out.
Working Capital Line of Credit:
One of the most important types of loans that you will need to have when you are a small business owner is a working capital line of credit. Businesses of all sizes will need to have access to working capital at some point. Even if you are very successful and profitable, you will have working capital needs as your customers often will not provide payment for a period of time after you perform your service or sell your product. This period of time, which can range of to 90 days, could result in a serious cash flow crunch. When you have a line of credit, you will be able to borrower against your outstanding A/R.
Another type of loan that will be helpful for business of all sizes is an inventory loan. If you produce a product you will likely need to buy a lot of inventory before it can be produced. In many cases this will require you to spend cash up front before months before you collect on the sales of the final product. An inventory loan can provide you with financing you need to purchase inventory. This is ideal for new businesses, those that are growing, or businesses that are in a seasonal industry.
Capital Asset Loan:
If you need to own your own capital equipment to operate your business, taking out a loan could be a good idea. Machines, technology, software, and other equipment can help to grow and manage your business, but are also very expensive to invest in. For many people, a much better option would be to take out a loan to finance these assets. You can often receive a low interest loan with a favorable repayment term to finance these assets.
Real Estate Loan:
If your business operates out of a warehouse, retail space, or other type of real estate, it may be a good idea to purchase the underlying real estate. This will provide your business with the ability to build long-term equity and can be more affordable than renting. Purchasing a commercial building is very similar to purchase residential real estate. While you will have to put forth a down payment to purchase the building, you will also be able to get a great interest rate and an amortization schedule of 25 years or more.
Yorkville Advisors, LLC is a privately owned and operated hedge fund sponsor.