Blending Credit Options: How Businesses Use Multiple Loan Structures Together

 

Starting or growing businesses rarely rely on a single financing tool. Different objectives, such as financing working capital, equipment, or expansion, call for a variety of credit structures.

Blended financing strategies leverage multiple resources to achieve a tailored balance of liquidity and stability. Here’s a guide to three of the top flexible business financing options to consider when planning your company’s strategy.

Why One Loan Type Isn’t Always Enough

When it comes to business financing, there’s no one-size-fits-all solution. For instance, working capital and long-term investments have different cash flow profiles. Relying on one credit product can strain liquidity or limit flexibility.

Flexible business financing options let you match your loan vehicles to your goals. Whether you’re a Holland manufacturer planning equipment purchases, a Rockford distributor financing inventory, or a Grand Rapids service firm managing growth-cycle expansion, a flexible financing strategy can cover your needs.

3 Common Credit Options Businesses Combine

Financial service providers today offer a diverse range of financing options. Three of the more popular components of flexible financing strategies are lines of credit, term loans, and equipment financing.

1. Lines of Credit

Lines of credit provide a revolving account where you can borrow against a set limit, make payments, and spend funds again until the end of a designated draw period

Lines of credit serve day-to-day cash flow requirements and seasonal expense needs. For instance, they can be used to support accounts receivables, help purchase inventory or capitalize on seasonal needs.

2. Term Loans

Term loans provide a lump sum that you repay over a designated time frame. Loans may have terms of one to ten years or more.

Term loans help support longer-term investments such as business expansion, machinery, commercial vehicles, and commercial real estate.

3. Equipment Financing

Equipment financing provides funds for equipment purchases. Repayment terms resemble short-term or intermediate-term loans.

Because the equipment itself serves as collateral, this option can be easier to qualify for than other types of loans. It enables companies to acquire critical assets such as machinery while preserving cash.

These tools and others can be deployed separately or combined together to meet your financing needs. For example, a manufacturing company might draw on a line of credit to purchase materials, use a term loan to finance facilities and equipment financing to cover machinery investments.

Building a Balanced Financing Strategy

How can you weld multiple tools into a balanced financing strategy? Here are three key steps:

1. Align your credit structures with your business goals and timelines to determine your optimal loan mix.
2. Monitor your debt service and covenant requirements to avoid penalties and maintain credit.
3. Schedule regular reviews with financial partners to keep your financing strategy current.

Implementing these guidelines will help you keep your financing balanced with your goals and cash flow.

Find Your Best Flexible Business Financing Fit with West Michigan Community Bank

If you’re considering a flexible financing strategy, West Michigan Community Bank can help. Our commercial banking solutions include term loans, lines of credit, equipment financing, and other options. Contact us to discuss how we can help you find the best financing fit for your business.