How much of a down payment you need for a business loan will depend on various factors related to your personal finances. The type of loan also makes a difference.
Having enough capital is one of the most common obstacles for a new small business or even an established business. One way of obtaining the capital needed is through a business loan. On the other hand, many people are hesitant to apply for a loan due to lack of funds for a down payment.
However, what many do not realize is that some types of business loans do not require a down payment at all. Other types of business loans do require a down payment, but the amount will vary depending on specific factors.
What factors determine the required down payment?
The amount you will be required to provide as a down payment will depend on various factors. First, the type of loan should be considered with many government-sponsored loans requiring no down payment at all. The purpose of the loan and the amount of money you are borrowing will also play a role in calculating your required down payment. Also, your financial profile (income, assets, debts, etc.) will factor into the creditor determining how much up front will be needed.
Small Business Association loans
One type of loan for business owners are those offered by the Small Business Association (SBA), a government agency created to help in the development of the small business sector. Two types of SBA loans have down payment requirements. However, there are many SBA loans that do not.
The SBA loans not requiring a down payment are the SBA microloans, the SBA CAPLines Program, SBA export loans and SBA disaster loans.
Commercial real estate loans
One of the most significant investments for most businesses is purchasing commercial real estate. In order to obtain a loan for commercial real estate, you will need to make a down payment.
Commercial equipment financing loans
Financing a loan for commercial equipment enables your business to obtain the equipment needed immediately so you can start making money operating your business. One good thing about financing commercial equipment is that many times the lender will consider the equipment as collateral which means you may not need to start with a down payment.
Although it is possible to use any type of loan to buy equipment for your business, with a loan specifically for this purpose you can avoid a down payment and use your cash for other business costs and expenses.
A business line of credit
Obtaining a business line of credit is when the lender sets aside a certain amount of money for you to borrow as needed when you want to pay for business expenses. The advantage of this type of loan is the flexibility. You are not required to borrow any amount of funds until you need it. Also, there is no down payment required.
Give us a call! We’ll help you develop a financing plan
Just simply obtaining a loan for the money you need for your business is not enough. You will also need to make sure you efficiently use the capital in a smart manner. A comprehensive financial plan is the best way to maximize your resources and set your business up for success! This type of financial planning is something we at Rademacher Financial, Inc. have experience in. We would love to hear from you and discuss how we can best serve you as you consider your options.
The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Rademacher Financial, Inc and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. This material is for informational purposes only as Raymond James Financial Services, Inc. does not provide business loans.