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Small and medium sized business owners often will face this question when they have achieved a certain level of scale, and are considering options to finance their continued growth. As the business owner, you, and/or other owners, may have already invested a reasonable amount of your own capital, in the form of time and money equity. Now as the business they business is looking at additional funding sources, accessing forms of borrowing such as loans or credit will start to make sense as you look to achieve your next wave of growth. long as the business is not overburdened with debt.

Is It Better to Get a Business Loan or a Business Line of Credit?

To be clear, both a small business loan, and business line of credit are forms of debt financing. But which one is more suitable can vary greatly based on your business needs. Because of that, let us investigate the features of each of these product, and what kind of situations each is better suited for.

Understanding Business Loans

Even within the category of business loan, there are a range of variations. So we will only discuss the most popular form of this type of loan, and its common features. There are three defining characteristics

For a typical business loan, there is a defined amount that is agreed upon between your bank and your business. That amount is made available to your business bank account immediately once the loan documentations have been confirmed and signed. This also means the entire amount is “outstanding” and accruing interest.

Once the amount has been made available to your business, there is now an obligation to repay the business loan over a fixed period of time (known as the “term” of the loan), at predetermined intervals. This is important to keep in mind, because there can be serious penalties if this schedule is not followed accordingly. Missing payments repeatedly can constitute as default, which will hurt your business credit worthiness in the long run.

  • Generally specified uses

Because of the two characteristics above, the business loan will generally have a specified purpose. For example, you need to open a second store location across town, and require investment to set up the store, or you’re buying machinery or equipment. This is because with these type of investments with specified purposes, you can predict can have a prediction of how the investment will pay off during the term of the loan, and show the bank you have the ability to make the scheduled payments.

Understanding Business Line of Credit

A business line of credit (LOC) is sometimes called an operating line of credit, because its purpose is to help finance ongoing operating expenses. Think of a line of credit as an insurance policy providing a cushion of cash when you need it. That’s why the best time to apply for a business line of credit as a borrower is before you need it. The general features are as follows.

  • Flexible borrowing

An LOC offers the flexibility to borrow the amount of money you need at any time, regardless of how much or how little it is, provided, of course, it's within your credit limit. The amount needed is drawn down at the time of spend, and only the amount outstanding would accrue interest until the time at which it is repaid.

  • No fixed terms

An LOC does not require you to make monthly payments on your outstanding balance; instead, you can make minimum payments each month, make bigger payments, or pay off your full balance, if you choose. This also provides a level of flexibility for business needs, given that sometimes the use of proceeds may not be easy to forecasts.

  • Various uses determined by short-term needs

Business lines of credit are best for short-term financing needs, such as payroll, seasonal expenses, unexpected payments or temporary cash flow shortages.

Deciding Which is Right for Your Business

Based on some of the features of each, it’s very likely that you have already begun to figure out which form of financing would be more suitable for your business. Because of the more pre-negotiated and fixed nature of business loans, these type of borrowing are more suited for larger, fixed sum investments. You can forecast the amount invested, and its return over a period of time, usually more stable cash generating projects  in nature so that the investment can cover the fixed payment schedules. These type of loans cover machinery and equipment leasing, and even mortgages on property can be viewed as a fixed term business loan.

For more everyday working capital, and buffers of operational cash flow shortfalls, a LOC would make more sense, because it offers flexibility to bridge short-term cash needs, and does not require repayment unless it’s being used. These type of borrowing products are useful for trading companies, retail, F&B businesses that require a lot of working capital, experience seasonalities and temporary lack of cash.

LOCs were traditionally considered a more flexible version of credit cards, where the same concept of using temporary capital to make payments. This used to be the case because credit cards were not always accepted, but cash from an LOC was.  However, now that you can make payments of any kind using platforms like Reap, the line between LOCs and credit cards are quickly disappearing.

As a business owner, it’s definitely possible to have situations where at least one of the two products are needed, and also situations where both are needed. The key here is to understand the features of both, and what is the purpose of seeking out business financing.

Separately, you may also consider using a personal loan, if the business is small enough or you feel financially comfortable as a sole owner to use personal credit for your company. For more information on what may be the best personal loans for this purpose, click here for some info from Moneyhero.

究竟申請商業貸款還是商業備用信貸會比較好呢?

先說明一點,小型的商業貸款和商業備用信貸,兩者均是以債務方式來籌組資金的方法。不過,那一種方案比較適合你則大大取決於你的業務需要。正因如此,就讓我們一同研究兩款融資產品的特點,並探討一下於那些情況下選用那一種方案更為恰當。

有關商業貸款

即使在商業貸款這一範疇裡,產品的變化差異其實很大。所以,我們只會討論商業貸款中最常見的貸款形式與及其特性。這裡列舉了三大特點:

  • 一次性注入資金

一般的商業貸款,你跟你的銀行已經商討好一個特定的借貸金額。當申請貸款的文件一經確認和批核,批出的貸款額便會即時注入你的商業戶口中。這個同時是你於銀行的“結欠” 總額,你亦需要開始為這筆款項繳付利息。

  • 定期還款

當你申請的貸款金額到戶後,你可以開始運用這筆款項,與此同時你亦有責任於指定時間內(俗稱為貨款的“期限”)按預設時限去償還這筆商業貸款。你必須緊記還款期的協定,因為如你未能按時還款,後果可以相當嚴重。屢次逾期還款可構成違約風險,長遠而言將損害你公司的信貸評級和商譽。

  • 概括特定用途

根據以上兩項特點,商業貸款一般會注明申請款項的特定用途。例如:你需要資金在另一個地區開設分店或者作添置機械設備之用。這些有特定用途的投資項目,可助你估算在貸款期限內所獲得的投資回報,以展示給銀行知道你有按時償還貸款的能力。

有關商業備用信貸

商業備用信貸有時又稱為營運備用信貸,因為它是用來支援業務的日常營運開支。試想想備用信貸就好像買保險一樣,在你需要應急錢的時候為你提供保障。這就正好解釋到為何貸款人最好未雨籌謀,在需要用錢之前先申請備用信貸以備不時之需。一般來說,它有以下幾項特點︰

  • 貸款靈活具彈性

備用信貸在借貸金額上極具彈性,只要金額是在你的信貸額之內,不論銀碼大小都可隨時支取出來應用。已提取的金額會從可用的信貸額中扣減,而你只需為已借用的結欠款項繳付利息直至金額還清為止。

  • 無固定還款期限

備用信貸不會規定你每月定期還款;相反,你可以選擇每個月只付最低還款額或償還更大筆的款項,甚或一次過繳清結欠餘額。這樣一來,即使有時候盈利收益不似預期,企業仍能靈活地按生意所需來調配資金。

  • 用途廣泛助你解決當務之急

商業備用信貸最適合短期內有財務需要的企業拿來應急,例如為員工支薪、繳付季節性開支、遇上突如其來的開銷或臨時現金周轉出現困難等等。

為你的企業選擇合適的方案

基於以上列舉的產品特點,相信你已經開始心中有數,知道那一種融資方案更切合你的業務所需。由於商業貸款需要企業與銀行之間預先協商好較多的既定條款,因此這一種借貸模式較適合需要大筆資金或特定金額來注資的企業去選用。你可以按注資的額度來估算一定時間後的回報,通常有穩定收益的投資項目會較容易滿足到定期還款的要求。這類用作機械器材租賃,甚至是物業廠房按揭的貸款均可視為商業貸款的一種,並且是有固定還款期限的。

至於日常的營運資金和現金流短缺時應急的備用錢,選擇備用信貸則更為合適。因為它較具彈性足以迎合短期的現金需求,貸款額亦只是於使用後才需要還款。這一種借貸模式對貿易公司、零售、餐飲業等需要大量資金營運、有旺淡季之分和有臨時現金周轉困難的行業非常管用。

備用信貸與信用卡的概念相近,兩者都是應用臨時資金來支付賬項,但備用信貸傳統上被視為是一種比信用卡更靈活的產品。特別是信用卡未必處處通用,但從備用信貸中支取的現金在使用上則毫無限制。不過,現在你可以透過好像Reap這類網上平台來繳付任何類型的賬項,備用信貸和信用卡之間的分野將漸漸消失。

作為企業東主,你總會遇上一些情況需要運用以上兩種產品的其中一種,又或者是同時需要用到這兩種產品來支援你的業務。不論你選用那一種借貸產品,最重要是先了解清楚兩者的特點和差異,再想想在籌組資金時希望達到的目的,這樣方能找出最配合你企業發展的方案。

除此之外,你也可以考慮私人貸款。如果你營運的公司規模不大,而你作為獨資經營者,願意以個人身份承擔公司的債務,這也未嘗不可。想知道哪一款私人貸款最適合你?你可以參閱 Moneyhero 網頁上的資訊。

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