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Business Guidance

4 Essential Business Loan Options Every Business Owner Should Know

By Matt Haas | Johnson Financial Group

6 minute read time


When a business owner is seeking financing, there are four key financing options to consider. From lines of credit to term loans, here’s an overview of each business loan, highlighting their benefits and considerations to help you make informed decisions about your financing needs.

As an aspiring entrepreneur or a seasoned business owner, securing the right financing is crucial for the success and growth of your venture. With a plethora of options available, it can be overwhelming to navigate the world of financing. In this article, I’ll walk you through the four most popular types of business loans, providing insights into their features, advantages and considerations. Here’s everything you need to know about securing the funding you need to fuel your business:

Why do businesses need loans?

Businesses often need loans for a variety of reasons. Here are few that you may be encountering: 

  • Startup Costs: When starting a new business, entrepreneurs often need capital to cover initial expenses. Startup expenses can include anything from office space to essential equipment needed to perform business.
  • Equipment and Asset Purchases: Businesses may need loans to purchase or upgrade equipment, vehicles or other assets necessary for their operations.
  • Expansion and Growth: As businesses grow, they may require additional funds to expand operations, open new locations, hire more employees, invest in technology or launch new products or services.
  • Cash Flow Management: Seasonal businesses or those with irregular revenue streams may face cash flow gaps. Loans can help bridge these gaps and ensure smooth cash flow management during lean periods.
  • Business Consolidation or Acquisition: Loans can facilitate business consolidation or acquisition by providing the necessary funds to buy out competitors or merge with other companies. 
  • Working Capital: Loans can provide working capital to cover day-to-day expenses, pay salaries, manage accounts payable and maintain a healthy cash flow. 
  • Real Estate: Capital for acquiring or leasing business properties, leasehold improvement or real estate development projects.

The 4 Types of Business Loans

Line of Credit 

Lines of credit are a valuable resource when you’re in need of quick and convenient access to cash. They are particularly beneficial for managing short-term financial needs like purchasing inventory or handling seasonal cash flow fluctuations.

With this loan type, you have the flexibility to borrow only what you need, reducing unnecessary interest costs. They often come with competitive variable interest rates, providing potential cost savings. Lines of credit are a versatile tool that can help you effectively manage cash flow and seize opportunities for growth.

Real Estate Loan

Real estate loans are for businesses looking to acquire land or property, as well as fund construction or renovations. These loans provide long-term financing with fixed monthly payments, competitive interest rates and fees and flexible terms and conditions.

With real estate loans, you can secure the necessary capital to invest in real estate assets that support your operations and contribute to your long-term growth. The extended repayment periods and predictable monthly payments make it easier to manage finances, while the competitive rates and flexible terms enhance the overall affordability and suitability of these loans. This loan type offers the opportunity to make strategic real estate investments and maximize success.

Term Loan

Term loans help your business purchase capital goods and equipment, fund a change in ownership or consolidate business debt. These loans provide long-term financing with fixed monthly payments, competitive interest rates and flexible terms and conditions.

By utilizing term loans, you can acquire essential assets and spread out the cost over a fixed repayment period, allowing for effective cash flow management. The stability and predictability of fixed monthly payments enables you to plan your finances more effectively. Term loans often come with attractive interest rates and flexible terms, making them a cost-effective solution for businesses seeking capital investments. Overall, they provide the necessary funds to support growth and success.

Small Business Administration Loan (SBA)

SBA loans are a versatile financing option for businesses, offering support for starting or acquiring a business, purchasing equipment, refinancing debt, acquiring inventory and supporting working capital needs. These loans provide long-term financing with lower down payments, competitive interest rates and flexible terms.

By accessing SBA loans, you can improve your business’ cash flow by spreading out repayment over a longer period. The reduced upfront cost and favorable interest rates make SBA loans an accessible and cost-effective choice. Additionally, the flexibility of SBA loans allows you to customize the loan to your specific needs, making it a valuable financing solution for entrepreneurs and business owners like you.

Business Loan Q&A

How do I choose a business loan?

Your business banker can help you decide which business loan is right for you. When you meet with them, you can cover any initial questions you have. Your advisor will act as your trusted guide, walking you through the loan selection process and ensuring you make informed decisions that align with your business goals and financial capabilities.

What factors should I consider when applying for a business loan?

Before applying for a business loan, you should consider a few important questions. Your advisor will go over these questions with you during your initial meeting but they’re helpful to think about beforehand as you’re considering applying for a loan: 

  • What is the purpose of your loan? 
  • How do you intend to use your loan? 
  • Do you have cash on hand?

Answering these questions will help determine which loan makes sense for you and your needs and whether you need a loan to achieve your desired business goals.

What information do I need to apply for a business loan?

Before applying for a loan, you should gather a couple of key documents for loan review. You will need to provide both personal and business documentation to your loan reviewer. Some of these items could include: three years’ historical year-end balance sheet and income statements, personal tax returns and three years’ historical corporate tax returns. These documents will be used to determine if you’re fit for the loan you’re applying for. Your business banker will ensure you have the right documentation on hand for review.

I have smaller, short-term payment needs. Do I need a business loan?

If you have smaller, short-term needs, a business credit card can be a useful option. While lines of credit are great for short-term purchases, credit cards are more suitable for everyday expenses and vendor payments. Additionally, by using a credit card, you can earn rewards while efficiently managing your day-to-day payments.

Ready to apply for a business loan? Connect with a Johnson Financial Group advisor to get started.


Matt Haas

Matt Haas

SVP, Business Banking Manager | Johnson Financial Group

As Senior Vice President, Business Banking Manager, Matt leads a team of relationship managers who are dedicated to delivering exceptional service to businesses across Wisconsin. He and his team focus on developing and maintaining long-term, meaningful relationships with closely held businesses. Matt takes time to understand each client’s business, specializing in developing customized solutions to meet their comprehensive financial needs.

Products offered by Johnson Bank, Member FDIC, a Johnson Financial Group Company. Loans are subject to credit and property approval, bank underwriting guidelines, and may not be available in all states. Other loan programs and pricing may be available. The term of the loan will vary based upon program chosen. Certain conditions, terms, and restrictions may apply based on the loan program selected. Property insurance is required; if the collateral is determined to be in an area having special flood hazards, flood insurance will be required.