There are already so many different things that your typical small business owner is in charge of. Keeping track of payroll, keeping your employees happy, and taking care of your existing customers is already a handful in itself. Sometimes it can be hard for a business owner to pay much attention to their financing needs. Small business finance is one of the most overlooked areas of a small business. Business owners take care of more pressing needs and don't step back to look at some of the solutions that are in the market that can help their company grow to the next stage. They don't educate themselves and instead let their banker tell them what's right for their business. This will give you a quick rundown of the main financing options that are available, think of it like a cheatsheet for meeting with your banker.

A small business line of credit is something that you use for short-term funding needs. So for example, if you have Accounts Receivable that you were waiting on from one of your customers any you needed to make payroll that week. You would simply borrow on your line of credit to pay payroll. It helps you maintain a good working relationship with your customers because you aren't calling them on the days leading up to payroll and it also keeps your workers happy tha they are getting a paycheck this week. And when that Accounts Receivable comes into your company that you would pay back the line of credit. The idea is that you use the line to ease the pain of a short term cash crunch. Another common use is for one you're purchasing inventory to receive a discount from your supplier. In this situation you would borrow on your line of credit in order to purchase the inventory and then once that inventory is liquidated and you've collected your Accounts Receivable, that you would pay back your line of credit. A lot of small business owners misuse lines of credit by using them to purchase equipment. Really, the line must be used only for easing the pain of the short term cash crunch. By using a small business line of credit, You can greatly improve the cash flow situation in your business.

As your company grows one thing most small business owners want to invest in is their own building. Purchasing your own building is a great way to invest in a long-term asset that will continue to pay dividends long after you've sold your business. When you're talking about the cost of the building, typicaly just getting a little better deal can make a huge difference. The most common terms for acommercial mortgage is a five-year fixed-rate loan that is amortized 20 years. In recent years banks have gotten more aggressive, in both are pricing in terms of the loans. It is not uncommon to see fixed rates up to 10 years and amortization up to 25 years. There are even some government options where you can put less down than a bank will typically require. This is a great option if this is going hold onto the building for more than 10 years, because there are significant prepayment penalties. Generally, banks will priced these loans at a spread above the corresponding treasury. An example would be aon a ten-year note, you can generally guess that your loan would be priced at 2-2.75% over the 10 year treasury. It's not uncommon to see banks asking for points when they're financing your building, but if the shop around you should be able to get away from paying much in points or fees.

One thing that there is definitely a need for the marketplace is small business loans, and unfortunately, banks are not too eager to make startup loans. The most painless thing that you can do when you want to fund your startup is to either find some investors (like friends or family) or to gain access to funds by way of a Home Equity Line of Credit. Typically, since you have no track record and no collateral the bank will request to use your home as collateral for the loan, so the easiest thing to do is to utilize the streamlined process that banks have in place for HELOCs. This will be far easier and you'll end up paying a lot less in the long run. It's quicker to get approved, there are less questions, and you can generally get a much lower rate than you would if you went the commercial route. The one objection that most business owners have to doing a HELOC is that they want to build up business credit. It comes as a surprise to most to hear that there is no such thing as building business credit. The only thing that a bank will look at when you request your first loan is your company's financial statements. So as long as you could show the ability to repay the loan based on your past financial statements, you have no problems getting a loan, and that is why I recommend a home-equity line as a means for getting the funding to start up your business.

Do yourself a favor and just learn the basics. They'll take you a long way in your business and it's worth it to learn a little bit in order to put you and your company in a better position to take advantage of loan products that will help take your business to the next level. In addition to bank loans are also SBA loans that can be used if your business doesn't quite fit the qualifications that the bank is looking for. While many people are fearful of borrowing money from the bank, it is smart borrowing that allows companies to grow to their full potential.