One loan isn’t the same as another when borrowing money to build or sustain a business. Bank loan agents act as matchmakers, fitting business owners with the type of credit they need for specific business needs.
Most banks offer a menu of loan options tailored to an entrepreneur’s individual circumstances — his or her credit history, cash flow, collateral, capacity and capital. The loans can be conventional, or they can be guaranteed with backing from the U.S. Small Business Administration if the business would otherwise have a hard time qualifying for a conventional loan and the owner needs more flexible loan terms, such as a longer repayment schedule and less stringent collateral requirements.
If a business needs money for working capital, an ideal product is a revolving line of credit, said David Valdez, a small business/commercial lender at Century Bank’s Santa Fe office. “The business uses the line when cash coming in is slow and pays it down when the cash is flush.”
Working capital covers seasonal expenses, such as the purchase of inventory, supplies and materials, and it can be used to bridge timing gaps when accounts receivable aren’t keeping up with payroll, urgent bills and unexpected expenses.