Comparing Business Loan Options: Which Loan is Best?

Strong financial health is the backbone of any successful business. Whether you are a small business owner launching a startup, a mid-sized company scaling for growth, or a large corporation planning major investments, having access to the right funding can make or break your business growth. But with so many options available, how do you choose the best business loan for your needs (and your balance sheet)? This guide breaks down six common types of business loans and when to use them. Let’s get started!

Business Term Loan

When you think “business loan,” you are likely picturing a business term loan. This type of loan is one of the simplest forms of business financing. It provides a lump sum of money upfront, which is repaid in regular installments over a set period, typically with a fixed interest rate. Business term loans are a widely used solution for funding long-term investments.

Business Term Loans Are Best For:

• Purchasing expensive equipment
• Expanding your operations
• Funding big projects that require upfront capital

Business Term Loans at Academy Bank

Business Line of Credit

A business line of credit works like a credit card. It provides flexible, revolving access to funds, and you only pay interest on what you draw. One key benefit is that you can borrow more funds whenever needed without reapplying each time.

A Business Line of Credit Is Best For:

• Managing short-term expenses
• Balancing seasonal cash flow fluctuations
• Covering unexpected operational costs

Example: Your retail business purchases extra inventory every holiday season. With a business line of credit, you can stock up on products beforehand without draining your cash reserves. So, when the holiday sales start rolling in, you can easily repay the business credit line.

Business Lines of Credit at Academy Bank

SBA Loan for Small Business

A SBA loan is a special business loan partially backed by the Small Business Administration. This backing reduces the risk for lenders since the SBA guarantees a portion of the loan, leading to better terms for small business owners. As a result, SBA loans are more accessible for borrowers who might not qualify for traditional loans because of limited credit history. In addition to competitive terms, these special loans also offer lower down payments compared to many other financing options.

Small business loans are not one-size-fits-all, and the right loan for your business depends on factors such as your company’s size, needs, and financial situation. Fortunately, the Small Business Administration offers a range of options, including microloans, 7(a) loans, and 504 loans, each tailored to meet different business goals and requirements.

SBA Loans Are Best For:

• Small businesses who may not qualify for traditional business loans
• New businesses or startups who need working capital
• Equipment or inventory purchases to support growth

SBA Loans at Academy Bank

Commercial and Industrial Loan

A Commercial and Industrial (C&I) Loan is designed for businesses operating in manufacturing, distribution, and service industries. This type of loan is often used for large-scale projects, such as equipment financing or facility expansions.

C&I Loans Are Best For:

• Projects in manufacturing or distribution that require significant upfront capital
• Facility expansion
• Purchasing equipment or machinery
• Owner-occupied real estate for business operations
• Working capital

The lending approach for C&I Loans varies based on the intended use. If it’s meant for a one-time expense—like purchasing equipment, acquiring owner-occupied real estate, or funding a major expansion—the best fit is a lump sum loan with a clear repayment structure. Meanwhile, for ongoing financial needs—such as managing cash flow, purchasing inventory, or covering operational expenses—a revolving line of credit may be more appropriate.

Commercial and Industrial Loans at Academy Bank

Corporate Lending

Corporate lending is best for businesses that are well-established and ready to scale even further. These businesses typically seek funding to fuel mergers, acquisitions, or refinancing existing debts. Corporate lending comes with more complex terms—often including detailed conditions and requirements. Their repayment terms tend to be longer than those of traditional business loans, and they are usually secured by collateral like real estate, equipment, or inventory.

Corporate Lending Is Best For:

• Growth through acquisitions
• Restructurings and recapitalization
• Refinancing existing debt at a better rate
• Sponsor financing
• Expanding into new markets

Corporate Lending at Academy Bank

Commercial Real Estate Loan

If your business is looking to buy, improve, or develop existing commercial properties, then a commercial real estate loan (CRE Loan) is a smart financing option. This loan is a mortgage secured by a legal claim (lien) on the property, meaning the lender has a legal right to the property until the loan is fully repaid. If the borrower fails to repay the loan, the lender can sell the property to recover the outstanding balance.

CRE Loans often have long amortization periods, meaning the loan repaid over an extended period (typically 20-30 years). Towards the end, borrowers make balloon payments to cover the remaining balance.

Typical CRE Loan candidates include business investors like corporations, developers, partnerships, funds, and real estate investment trusts (REITs). These entities do not occupy the real estate themselves but instead receive rental income from other businesses and tenants that occupy the premises. Essentially, the property serves as an investment that generates income to repay the loan.

When evaluating commercial real estate loans, lenders consider several factors, including the nature of the property being purchased (collateral), the creditworthiness of the borrower, and different financial ratios. These criteria help lenders assess the risk and determine loan terms.

A Commercial Real Estate Loan Is Best For:

• Buying commercial property for business use, like office buildings or retail spaces
• Funding renovations to increase commercial property value or functionality
• Refinancing existing property loans to take advantage of better loan terms or interest rates
• Developing new projects, such as constructing a new shopping mall, warehouse, or apartment complex

Commercial Real Estate Financing at Academy Bank

Choose the Best Business Loan Option for Your Organization

No two businesses are the same. Startups need funding to turn ideas into reality, while established companies seek expansion and restructuring. Whatever the goal, business loans are essential for achieving growth.

Which Business Loan is Best for Me?

• Need short-term flexibility? A business line of credit is the answer.
• Investing in long-term growth? Consider a business term loan or commercial real estate financing.
• Starting small or facing challenges in receiving funding? SBA loans might be worth exploring.
• Running a large corporation? Corporate lending or C&I loans could be the perfect fit.

At Academy Bank, we specialize in providing tailored business banking and lending solutions for organizations of all sizes. Whether you are a startup founder browsing SBA loans for new business, or an established corporation exploring corporate lending options, our team is here to guide you throughout the process.

Take your business to the next level! Reach out to our Business Bankers and Commercial Lenders for personalized assistance and expertise.

Compare Business Loans

MORE RESOURCES:
How To Build Business Credit
How To Choose the Best Business Bank Account
Why Get a Small Business Loan from a Family-Owned Bank?
Why Do Businesses Need Treasury Management Services?
Who Should Take Out a Small Business Loan?