To begin, let’s define the difference between business lending/financing and traditional bank loans. Both involve taking on debt to secure financing by taking advantage of credit arrangements. Bank loans and loans from places like credit unions are structured around your financial history and your reputation as a borrower. For more established enterprises with a high FICO score, this can be a good option, though even then there are challenges.
An alternative path to getting funding is direct business lending/financing or a “line of credit.” The criteria for these are generally much less stringent and, if you partner with a company like Mach Financing to get one, the funds are available in your account in two days or less. Learn more about how it works.
Which Type of Financing Is Best for Your Business?
Wondering if pursuing a business loan or direct financing is better for your business? The answer depends on a number of factors.
- How much money do you need? If you need more than $250,000, a more traditional bank loan is usually a better option.
- Do you value flexibility or predictability more? Direct financing provides more flexible rates, while bank loans are more likely to have a fixed, long-term interest rate.
- Are you wanting to improve your business’s credit score? Getting business financing and paying it off without missing a payment can help grow your business’s financial reputation.
- What are you planning to use the money for? Getting a loan designed for a specific purpose or with no restrictions can impact your decision as well.
Speak with a member of Mach Funding to discuss your options in more detail.
More Differences Between Direct Financing/Lines of Credit Vs. Bank Loans
The first difference to be aware of between a line of credit and a bank loan involves the repayment schedule. A business line of credit does not involve defined terms and is less rigid, while a small business loan can lock you into a fixed payment schedule for a predetermined amount of time.
Other Key Differences
As well as variance in repayment schedule, it’s also worth pointing out that a business line of credit tends to have much more relaxed requirements, as financing amounts tend to be lower. A small business bank loan usually involves larger sums of money.
Should You Get a Bank Loan or Start a Direct Business Financing Line of Credit?
Deciding between a line of credit and a bank loan comes down to a few core factors: how much money do you need, what will you use it for, and how flexible do you need it to be? If you have determined that smaller, more flexible financing is what you are looking for, Mach Funding can help. Filling out an application form and providing bank statements is all you need to do to get your funds disbursed through us. Get your funds in two days or less — apply now!
