Best Bank for Borrowing Working Capital for a Business for Expansion

All small businesses need to grow if they wish to remain sustainable in the long run. Once your startup has been profitable and stable in the short run, it may be time to start borrowing working capital to expand your operation.

Expanding a business is accompanied by an array of advantages. The benefits include the potential for growth and greater revenues than before. However, the expansion of a given business is only possible If you have enough resources. The thing with small businesses is that their revenues or cash balances are quite limited.

How, then, can you expand your operations? Well, you can do so by borrowing working capital.

Factors to Consider

Before you opt for a bank and expansion loan, make sure you look for the following factors.

• Ensure that the expansion project will lead to greater profit than the cost of the loan.
• The loan’s repayment period should be long enough for you to be able to easily pay off the loan. This is only possible if it is aligned with your projected sales or revenue.
• The borrowing cost, aka the interest rate, should be satisfactory.

After analyzing these factors, you will be able to pick the best bank and the best loan for your expansion project.

Types of Bank Loans

There are various different types of loans that a bank offers to borrowers. The best bank for borrowing working capital for business for expansion is one which has a variety of loan options and a comparatively low borrowing cost.

Here are a few types of loans that you can find in various banks.

Line-of-Credit Loan

This is a short-term loan that you can avail from a bank where you have your business checking account. This loan works by increasing the upper limit of the account as per your loan. The interest paid depends on by how much the upper limit was stretched and how long it took you to repay the amount. These loans are made specifically for borrowing working capital requirements.

Balloon Loan

This is yet another loan that might be ideal for expansion projects. This is because rather than requiring the principal to be paid over a period of time, balloon loans work by providing you with a loan and then charging periodical interest payments over the life of the loan. On the maturity date of the loan, the principal amount is due. This might be ideal for expansion projects as it gives the firm enough time to become stable and recognize profits.

Best Banks to Borrow From

Remember, there is no such thing as a universal best bank. It all boils down to what offers does a given bank offer to you. This, in turn, is dependent on various factors, ranging from previous profitability to credit rating. Hence, a bank which a profitable business that is opting for expansion considers to be the best might not be so great for a startup.

Here are two banks that have been appreciated by many.

SmartBiz

This bank is known to provide its customers with excellent small business administration loans. The repayment period of these loans can be as long as a decade and, therefore, succeeds in reducing the monthly payments due. This feature makes the loan offered by the bank to be low in cost. Moreover, the annual interest rate is also known to be low, further decreasing the cost of borrowing.

However, SmartBiz only offers this loan to small businesses that are strong and growing. Moreover, the approval process can take some time.

OnDeck

Are you in dire need of some quick cash? Do you wish to choose a bank where qualifying for a loan is marked by ease? If so, you might find OnDeck to be a suitable option.

This bank does not have as strict qualification requirements as some of the other banks. Therefore, it is easier for a business to get a loan approved by this bank. Furthermore, the process itself is quite fast and can be done online or over a phone. However, the fast service comes at the cost of significantly higher interest rates.

Conclusion

Expanding your business is integral if you wish to survive in the competitive industry. In most cases, this means looking for working capital loans. Make sure you pick the best bank for borrowing money.

The best bank for you will be the one which provides you with a low interest rate, fast money, quick approval process, and convenient repayment terms. However, remember that there is a trade-off between these features. Prioritize amongst them and choose a bank accordingly.