Illinois is home to 1.2 million small businesses, which make up the majority (99.6%) of businesses in the state. Illinois small businesses also employ nearly half (45.1%) of the state’s workforce. As the leading community bank in West Central Illinois, First Bankers Trust understands small businesses’ crucial economic role in the communities we serve. We created this guide to help small business owners in Quincy and across West Central Illinois figure out which type of business loan is best for different situations, and how to secure the financing you need to grow your business.

What Can Business Loans Be Used For?

Let’s start with the reasons businesses seek commercial financing in the first place. What do companies use loans for?

Simply put, small businesses use commercial loans for business-related expenses like start-up funding, working capital to cover everyday costs, commercial real estate, and equipment purchases.

Generally, business owners seek financing to avoid draining their personal savings or straining the business’s cash flow. Working capital financing can help businesses survive a slow period or seasonal cash flow shortage.

Loan terms and interest rates vary on business loans, largely depending on the financial situation and history of the business. However, business loans typically offer a lower interest rate than a business credit card. And you don’t have to give up part of your ownership stake to an investor.

Business Loans can be used for a range of expenses from start-up funding, capital for everyday expenses, to purchase real estate or to buy equipment.

How To Get a Small Business Loan

There are a variety of business lenders out there such as banks, online lenders, and others. The application process is usually relatively fast, especially with a community bank like First Bankers Trust that makes loan decisions locally.

To obtain a business loan, you’ll need to specify the reason you’re applying for business financing–in other words, what will you use it for? Then, you must meet the business loan application requirements with supporting documents such as:

  • Cash Flow Statement: This shows the amount of cash your business has on hand to pay back the loan.
  • Debt Service: Just as your debt-to-income (DTI) ratio is an essential personal financial factor, it’s also important for your business. The higher your business’s DTI, the riskier you may appear to lenders.
  • Credit Score: Depending on how long you’ve been in business, lenders may want to see your personal credit score, as well as your business’s.
  • Annual Revenue: Your business loan lender may be looking for a certain minimum annual revenue in order to approve your business loan application.
  • Collateral: Business loans can be secured or unsecured. If you apply for a secured loan, you’ll need to identify collateral (such as accounts receivable, a piece of equipment, or commercial real estate) to back the loan.
  • Business Plan: Your business plan is a significant piece of getting a loan approved. A thorough business plan should include financial projections, what you will use the loan for, your industry outlook, and competitive analysis.

Before seeking a business loan make sure you meet all the minimum application requirements and have a plan in place to pay back the loan.

Considerations Before Choosing a Business Loan

Before shopping for a business loan, stop and ask yourself how much money your business needs to borrow, what you’re using it for, and how long it will take to pay it back. Here are some additional questions to ask before deciding whether obtaining a business loan is the right decision:

  • How much money do you need?
  • What do you need the money for?
  • How long will it take you to pay it back?
  • What is the current financial shape of your business?
  • How much collateral, if any, do you have to put up for the loan?
  • What’s your credit score?
  • Do you have any other outstanding loans?

Even if you don’t end up applying for a business loan right now, establishing a business banking relationship is still a good idea. Making it easier for you to secure financing in the future. One of the simplest ways to start a business banking relationship is to open a business checking account. You never want to combine personal, and business bank accounts for tax and organization purposes. 

What Are the Different Types of Business and Commercial Loans?

Now that we've gone over how commercial lending works, let's dive into the different business loans available to you in Quincy, IL.

Commercial Real Estate Loans

Purchase commercially-zoned real estate such as land and buildings to operate your business in or to rent out to other businesses. Commercial real estate loans can also be used to renovate your existing commercial space. They typically have longer terms and require a down payment.

Business Line of Credit

Borrow against your Accounts Receivables to supplement your cash-flow and cover short-term expenses such as inventory purchases, payroll, rent and utilities, and more. Business Lines of Credit typically have a short term (up to 2 years). This option is best for businesses that need flexible financing to help them get through cyclical or seasonal cash flow shortages.

Letter of Credit

Use your bank’s credit standing to assure a business partner, customer, or vendor that you will make good on your end of the bargain. In vouching for your business, the bank guarantees payment even if you default.

SBA Loans

These small business loans are backed by the U.S. Small Business Administration, making it easier for local small businesses to secure the funding the need. Choose between:

  • 7(a) Loans: The most popular type of SBA loan, 7(a) can be used for real estate purchases or working capital.
  • 504 Loans: Long-term, fixed-rate financing for the purchase of major assets.

The most popular type of SBA Loan are 7(a) Loans which are used for real estate and working capital.

Equipment Financing

A business equipment loan can help you purchase the necessary equipment or machinery while potentially benefiting from amortization (consult with your tax advisor). Equipment loans typically have terms of up to 5-6 years.

Term Loans

The all-purpose working capital loan for businesses. Choose a short or mid-range term that fits your budget with predictable monthly payments on a fixed interest rate. Term loans are a good option for any type of business and business financing need.

Business Credit Card

Enjoy the convenience of making everyday business purchases with a secure credit card. Business credit cards also offer built-in business expense reporting to make your accounting processes easier.

Contact one of our business loan specialists in Illinois!

Looking for small business financing in West Central Illinois? First Bankers Trust Company offers various types of commercial financing dependent upon your needs. Our commercial lenders in Quincy, IL, can help you review your business loan options. We strive to offer you the best commercial loan rates in Illinois. Contact a loan specialist to determine the best option for you. You can also visit one of our branch locations in West Central Illinois. Learn more about our full suite of Business eBanking services.