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Small Business Loans - Business Expansion

Written by: Rebecca Game

Small Business Loans - Business Expansion

It may be wishful thinking to envision business dreams and ideas without any type of financing. While it certainly can be done, most business owners find a time where business expansion is needed, whether it be to purchase equipment such as printers, computers, and photo copiers; to invest in products and services needed to promote the business, including printed pieces, promotional items, public relations, and advertising; or to purchase something as straight-forward as inventory for a retail business.

When getting a business loan, there are two clear options: a bank loan or a credit card loan. While bank loans, in most instances, tend to offer better interest rates, credit cards can be beneficial if the balance can be paid in full in a short period of time. Depending on the situation, both options are good to consider.


A loan or other type of financing can bring growth and added income to an existing business, or can be a valuable tool for a start-up business, but also has the potential of becoming a burden. Financing options need to be weighed carefully, so before picking up the pen and signing on the dotted line, consider the following:

- Is the interest rate reasonable? If not, consider a different option such as refinancing your home for a cash-out payment. Home loan rates are often much lower than business loans, and in most instances, the interest is tax deductible, offering even more benefit at the year's end. For this reason, check into both options before deciding which is best for the business.

- What is the monthly payment, and how many payments are needed to pay off the loan? If the term is longer than what you wanted, or if the monthly payment sounds unreasonably high for your business budget, ask for other options. Don't ever take a loan that has high payments that will be difficult to take out of the monthly budget. If payments are late or can't be made for even one month, late fees will incur, credit scores will be affected, and future loans may become difficult, or worse yet, impossible. Loans are meant to be of assistance, not of nuisance. Don't purposely bring stress into a business by financing more than is affordable, even if it potentially means growth. Risk of this nature is not always good. Borrow money slowly. Pay off one loan, then if another is needed, move forward with another one.

Credit Cards

While not recommended for all business financing needs, credit cards have their advantages in certain situations. Considering the positives and negatives of credit cards is important for business success, and using credit cards wisely is crucial. Advantages of using a credit card as a loan source are as follows:

- The interest can be lower. A lower rate on a credit card than on a loan? It's definitely possible. There are many financial institutions that will work hard for new customers. If your credit scores are good, you may be eligible for this type of credit card, and can consider something such as a zero percent interest card. This zero percent interest rate is normally available for up to six months, depending on the offer given by the financial institution. If paying the borrowed money in full during that particular period of time is planned, a credit card of this nature may be the way to go.

- The money is available immediately. Bank loans can take time to approve. Depending on the financial institution, a wait of five to ten business days for the loan check to be cut is not uncommon. Additionally, a waiting period is required in some states once the loan is signed. If a credit card is already available, and money is needed rather quickly for something such as equipment repair or an emergency purchase, a credit card is ideal. It's important to remember, though, that the credit card should be paid in full as quickly as possible, not only to avoid high interest rates and payments, but also to keep credit scores as high as possible. Paying off a credit card quickly actually increases credit scores, which offers empowerment for future loans.


A third option for a business loan is to find an investor. This is a wonderful way to bring money into a business for long-term expansion and growth, or to develop a new product or service. The downside, especially to sole proprietors who enjoy fully managing the business, is that the investor becomes a part owner of the business. However, investors can bring much needed income to a business, without bringing in loan or credit card payments and interest. Believe it or not, there are many people that are looking to invest in a business. Investors can be sought out quite easily.

- Talk to friends and family. Not everyone finds it possible to work with family members, though if you're one of the lucky ones, a friend or family member could be a wonderful investor. The trust factor is usually high with those business owners who feel a family member could have a positive financial impact on the business.

- Network with others. Ask friends, family, and other business owners, as well as people you see about every day - at the gym, the grocery store, the post office. When the word is out that you're in search of a business investor, it can be surprising how quickly something like this can work out.

Choosing a Loan Source

In order for a business to succeed, it's extremely important to choose the correct option for financing - a loan, use of a credit card, or an investor. Write the facts down to properly envision the business' needs, as well as goals for the business. Talk to others. Research each idea individually. Do your homework. Think things over carefully. Review business budgets. Take the time needed to make a wise financial decision. By doing so, the business will be affected in a positive way.

About the author:

Rebecca Game is the founder of Digital Women , an online community for women in business. A 30 year entrepreneur and dedicated to helping other women. Visit her site: Loans for Women


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