When a small or medium-sized entrepreneur (SME) is starting their business or expanding it to be more competitive and efficient, they may need to obtain business financing to achieve these goals, thus not impacting the business cash flow. In a previous blog, we explained all the factors that a financial institution takes into consideration when evaluating the creditworthiness of SMEs and the type of documents requested. Today we describe some of the financing products that exist in the market, which we also offer you at Oriental, and the primary purposes and terms for each one.
One of the options available to SMEs is the commercial term loan, which exists in the short and long-term options, according to the client’s need. Among the primary purposes for long-term business loans are the purchase of a business that is already operating, buying new equipment for the business, refinancing commercial debts, buying or building a property, or making improvements to your business, among others.
There is also the option of a short-term business loan, which is helpful since it is a loan you would be paying off in less than a year. This type of loan works very well when the amount to be financed is not very high. There may be several purposes when applying for a short-term business loan, such as: raising operating capital, financing accounts receivables, and covering unforeseen expenses.
Another business financing option is a line of credit structured to help you meet your business needs in the short term. Some specific uses of a line of credit are obtaining operating capital and short-term liquidity, financing accounts receivable, payroll, purchases of equipment or inventory, covering contracts, and covering unforeseen expenses. These lines of credit can rotate for recurring needs and be non-rotating for specific needs.
There are business credit cards if you are looking for an alternative to simplify accounting and optimize the management of your business expenses. This is an excellent option for travel and employee representation expenses. Through a request to the Bank, the client can distribute the total credit limit among company employees. If you assign a card with a different account number for each employee, you will receive one statement per card. Similarly, the business gets a detailed and consolidated monthly statement with the breakdown of expenses of each card on the account.
If you want to buy a commercial property, we also offer you the option of a commercial mortgage to finance properties requiring a longer repayment term. This type of mortgage loan varies according to the amount to be financed, but it can be up to 20 years. You can also use a commercial mortgage loan to refinance a commercial property.
Other popular options among SMEs are loans guaranteed by the Small Business Administration (SBA). The Federal Government ensures these loans are a more cost-effective option to finance your business’ short- and long-term needs and allow you to optimize your business’ cash flow with more flexible terms.
It is essential to mention that SBA does not issue the loan. The Bank or financial institution is the borrower, and SBA provides the guarantee according to the selected program.
- El Programa 7(a)The 7(a) Program is one of the most common SBA programs and is the best option when real estate is part of buying a business. You can also use it for short- and long-term working capital, refinancing current business debt, and purchasing inventory, equipment, and furniture supplies. Depending on the use of funds, the terms vary, for example, working capital for 10 years, equipment up to 10 years or more depending on the useful life of the equipment, and real estate up to 25 years.
- The SBA Express loan allows you to get a quick disbursement and lines of credit with a guarantee of up to 50% by the SBA. They offer you an answer to your request within 36 hours.
The SBA 504 program provides long-term, fixed-rate financing of up to $5 million for building purchases, long- and short-term operating capital, property improvements, purchase of machinery, equipment, and inventory, commercial property purchases, commercial debt refinancing, construction, or renovation of a commercial building, among others. The SBA 504 Program is available through CDCs or Certified Development Companies, non-profit corporations promoting economic development and job creation. CDCs are endorsed, certified, and regulated by the SBA.
If you are interested in requesting financing for your business or need help or guidance with some financial aspects, remember that at Oriental, we are more than ready to serve you. Go to orientalbank.com for more information.
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