When the time is right and your business is promising, it’s time to take it to the next level. As you position your business to expand, you may wonder how you face the next step with financial confidence.
There's no better place to start than by exploring your loan options. Let’s start with an overview!
Traditional Loan Banking
The size of your business and its needs (both long-term and short-term) will help to determine if a traditional loan is the right fit for you. Some basics to consider:
The Size of Your Business
Small (and Mighty)
Small Business Loans and Small Business Administration Loans (SBA), as the names imply, are well-suited and attractive options for small businesses. Loans provided by the SBA offer amounts between $250,000 and $5 million, lower interest rates, and longer repayment terms than standard commercial loans. You can use the funds for multiple purposes, such as working capital, purchasing inventory, and investing in real estate.
Medium to Large
Commercial Loans and Commercial Real Estate Loans are options for medium to large-sized businesses to explore. A Commercial loan can give you the advantage of maximizing your business’ working capital so you can react quickly to new opportunities. Commercial real estate loans, on the other hand, open the doors to a wide range of construction and commercial real estate loan solutions. They are secured by a lien on your commercial property, similar to how a personal home loan is secured by a lien on your residential property.
Your Business Needs
Term loans are longer-term loans that typically run five to seven years in duration. Businesses can use the funds to purchase inventory, assets like computers or vehicles, or for business expansion. This type of loan is usually not appropriate for startup businesses since they usually do not have enough collateral or credit history to secure the loan.
Line of Credit (LOC)
A Business Line of Credit (LOC) operates much like a credit card. Your business can borrow up to your credit line as the need arises. You don’t pay interest on the entire credit line, just the funds you use. Flexibility and the fact that you don’t have to apply for a loan every time you need access to capital are the two biggest draws of a business line of credit.
Equipment financing allows you to obtain equipment, such as heavy machinery or several computers, that your business needs to operate efficiently. At the end of the finance period, you can convert to a different loan and trade in the equipment for a newer model or opt to purchase it outright.
How to Qualify
For traditional loans, financial institutions generally look at the following to determine if you qualify:
- Credit scores - both personal (business owner) and business
- Annual business revenue
- The collateral that will be used to secure the loan
- Business documentation, including financials
- How many years your business has been opened
- The size of your business and the industry you're in
- Your business plan/proposal
If you're on a growth track, your business may not "check all the boxes" for a traditional loan. This can make it challenging to get the funds you need to continue to grow. You may need funding faster than a traditional loan will close, or perhaps you may be looking for a more flexible solution. Whatever the reason, when your business needs a customized solution, Mortgage Warehouse Lending is another great option to explore.
Mortgage Warehouse Lending
Mortgage Warehouse Lending is an alternative to traditional loan banking and is financing for your loan origination business.
Features & Benefits Include:
- Closing loans in your own name
- Gaining greater control over the scheduling of loan closings
- Obtaining better pricing from secondary market investors
Like with any loan, Mortgage Warehouse Lending is not a one-size-fits-all approach. There are many types of financing options, including:
- Mortgage Loans
- Lines of Credit
- Term Loans
Mortgage Warehouse Lending programs vary. It's important to look for a lender that can meet the needs of your growing business. For example,
- If you have locations in multiple states, consider a lender that can make loans in all 50 states
- Look at rates and fees - are they competitive?
- Be aware of the advance rate - some lenders offer up to 100%
- Take note of the warehouse period - the amount of time your loan would be spent “warehoused” before it is resold on a secondary market
Ready to Position Your Business for Success?
When you position your business for success, you keep it moving forward. At Lakeland Bank, we offer the best of both worlds: Traditional Business Loan Banking and Mortgage Warehouse Lending.
More importantly, we provide superior service and a valuable relationship to help you grow your business. For more information about our business loan options contact our Mortgage Warehouse Lending Team or a Traditional Business Loan Specialist. With local lending expertise, we are here to meet your needs.