When a small or medium-sized entrepreneur (SME) is in the process of starting a business or expanding to become more competitive and efficient, it is very likely that he or she will need to obtain commercial financing to achieve these goals and not impact his or her cash flow. In a previous blog we explained all the factors that a financial institution takes into consideration when evaluating the SME’s creditworthiness and the type of documents they request. Today we explain some of the financing available in the market, which we also offer you in Oriental, and what are the main purposes and terms of each one.
One of the options available to SMEs is the commercial term loan, which exists in both short and long terms according to the client’s needs. Among the main purposes for a long-term commercial loan 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 commercial loan, which is useful because it is a loan that 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 for taking out a short-term commercial loan, such as obtaining additional working capital, financing receivables, and covering unforeseen expenses.
Otra opción de financiamiento comercial lo son las líneas de crédito, las cuales están estructuradas para ayudarte a satisfacer las necesidades de tu negocio a corto plazo. Some of the specific uses of the line of credit are: to obtain operating capital and short-term liquidity, to finance accounts receivable, payroll, equipment or inventory purchases, to cover specific contracts and to cover unexpected expenses, among others. These lines of credit can be revolving for recurring needs and non-revolving for specific needs.
If you are looking for an alternative to simplify accounting and optimize the management of your business expenses, there are business credit cards. Esta es una excelente opción para gastos de representación y viajes de los empleados. By means of a request to the Bank, the client can distribute the TOTAL credit limit among the employees he/she selects. As long as you have a different card account number assigned to each employee, you will receive one statement per card. Likewise, the business receives a detailed consolidated monthly statement for the business with a breakdown of expenses for each card in the account.
In case you wish to purchase a commercial property, we also offer you the option of a commercial mortgage to finance properties that require a larger repayment or term. The term of this type of mortgage loan varies, according to the amount to be financed, but can be up to 20 years, and can also be used to refinance a commercial property.
Otras opciones que son muy populares entre los PyMEs, son los préstamos con garantía del Small Business Administration (SBA). These loans are guaranteed by the Federal Government, are a more cost effective option to finance the short and long term needs of your business and allow you to optimize your business cash flow with more flexible terms.
It is important to mention that SBA does not issue the loan as such. The Bank or financial institution is the borrower and SBA provides the guarantee in accordance with the selected program.
- Program 7(a)is one of the most common SBA’s, and is the best option when real estate is part of the purchase of a business, but can also be used for: short and long term working capital, refinancing current commercial debt and to purchase inventory, equipment, furniture, supplies, among others. Depending on the use of funds, the terms vary depending on the use of funds, for example: working capital 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 obtain fast disbursement and lines of credit with up to 50% guarantee by the SBA. They offer you a response to your request within 36 hours.
- The 504 loan program provides long-term, fixed-rate financing of up to $5 million for the purchase of buildings, long-term and short-term working capital, property improvements, purchase of machinery, equipment and inventory, purchase of commercial property, refinancing of commercial debt, construction or renovation of a commercial building, among others. SBA’s 504 Program is available through CDCs, or Certified Development Companies, which are non-profit corporations that promote economic development and job creation. CDCs are endorsed, certified and regulated by the SBA.
If you are interested in applying for any type of financing for your business or need help or guidance with any financial aspect, remember that at Oriental we are more than ready to serve you. Visit orientalbank.com for more information.
