Your Guide to SouthState’s Commercial and Small Business Loans

During the life cycle of your business, there will likely come a time when you need to obtain financing.

There are a multitude of lending products available, all of which have their own unique qualification requirements, interest rates, and loan terms. While having many options can be good, it can also make it challenging to determine which loan option is the best fit for you. Whether you are looking to expand your business, purchase equipment, or boost your working capital, we work to deliver a loan option that will meet the financial needs and goals of your business.

In this guide, I’ll provide you a brief overview of the primary types of business loans available and provide you with the knowledge to determine which type of business loan is best for you and your company.

Commercial Lending Solutions

At SouthState, we believe it is important to find a commercial lending solution customized to fit the unique needs of your business. Whether you need a revolving line of credit to meet occasional cash flow demands or specialty financing for major upgrades to your business, our commercial bankers bring solutions and expertise to keep your business moving forward.

Working Capital Line of Credit

A working capital line of credit is a revolving line of credit designed to provide business owners with supplemental working capital to cover day-to-day operating expenses and bridge cash flow gaps that occur in the ordinary course of business. A working capital line of credit is a revolving credit line, so you can borrow and repay capital up to your maximum approved credit limit as many times as needed.

This financing option is ideal for day-to-day business expenses and works very similarly to a business credit card. Unlike a business loan, a revolving line of credit enables you to pay back your debt and continue borrowing funds – up to your limit – without reapplying each time you need extra cash. Many business owners use a working capital line of credit to cover payroll for new employees, supplement seasonal cash flow gaps, order bulk inventories, and provide overdraft protection for their accounts.

You’re only responsible to pay interest on the funds you borrow. If you never use the funds, you typically won’t incur any interest charges. A line of credit doesn’t have a pre-determined re-payment structure, leaving much of the repayment at the borrower’s discretion. You will often be required to make at least a minimum monthly payment, but you can pay more to avoid accruing interest charges.

Equipment Financing

For some businesses, obtaining the right equipment might be a critical component to the success of your business. Having newer or better equipment might be the only differentiator between you and your biggest competitor. Equipment loans provide you with the funds to purchase or lease reliable equipment for your business. Interest rates and loan terms vary depending on the type of equipment, your business's financial position, credit score, and your lender’s underwriting criteria.

Equipment financing is relatively accessible for many small business owners regardless of credit, because the equipment serves as collateral for the loan. However, the higher your credit score, the more likely you are to receive more favorable rates.

Financing for the Public Sector

If you are a board member or help manage banking needs in the public-realm, you know finding a bank who understands your organization is key to securing the funds needed to support your mission. Financing for the public sector involves getting to know the ins and outs of your business and crafting a suite of financial solutions tailored to the needs of your organization.

Capital intensive organizations typically seek this type of financing when they’re looking to expand their services or construct new projects. Not for profit organizations are eligible to receive tax-exemptions and competitive interest rates.

Franchise Finance

If your goal is to own a franchise, you might want to explore financing programs designed specifically for franchises. These types of loans help entrepreneurs build, grow, and sustain a franchise. While similar to traditional business loans that can be used to purchase a franchise, seeking out franchise-specific financing gives you access to an experienced banker and customized programs designed around the unique needs of franchisees. Bankers that work in this space regularly can help you navigate the unique requirements to get your franchise up and running, smoothly navigate acquisitions, finance the right equipment, and more.

Acquisition Financing

Acquisitions can enable a company to quickly grow their business and take their organization to the next level. With acquisition financing, you can get the capital needed to purchase another business, scale your operations, and ultimately grow your earnings before interest, taxes, depreciation, and amortization (EBITDA). Often, acquisition financing combines a few different types of financing to complete the transaction and leverages the cash flow of the combined entity. In order to obtain this type of financing, there are typically minimum size and EBITDA requirements you must meet.

Capital Expenditure Financing

Companies seek capital expenditure financing when they have plans to purchase physical assets such as property, buildings, or equipment. In some cases, this type of financing allows borrowers to take advantage of various types of loans and leases for the acquisition of the asset to operate their business. Benefits of capital expenditure financing include up to 100% financing, customized amortization periods based on the asset, fixed rates, potential tax advantages, and more.

Capital expenditure financing allows for guidance lines of credit to be put into place enabling the borrower to ensure they have capacity to finance their capital expenditures throughout the year. The guidance lines of credit are offered with no fees or usage minimums.

Small Business Lending Solutions

Small businesses rely on access to cash. With nearly 33 percent of small businesses failing due to lack of capital, understanding your options can bridge the gap between your current operations and your future success¹. Without funding, small businesses stop growing and lose sales. We know you have a lot of choices, so we’re here to match you with the right solutions to achieve your business goals.

Small Business Administration (SBA) loan

SBA loans are likely the most well-known type of government-backed small business loan. Banks and other approved lending institutions partner with the SBA to offer these loans to small business owners, and due to their flexibility, they are a highly competitive business lending option. Because these loans are government-guaranteed up to 85 percent, banks can offer lower interest rates and longer terms than conventional business loans. Below are examples of common SBA loans.
 

SBA 7(a) loan

The 7(a) loan program is the SBA’s primary lending option for providing financial assistance for small businesses². Borrowers can receive up to $5 million, and funds can be used for business acquisitions, commercial real estate purchases, working capital, and more.
 

SBA 504 loan

A 504 loan is a long-term, fixed rate financing solution for major fixed assets that promote business growth and job creation³. Banks partner with SBA-approved certified development companies (CDC) to fund these loans. CDC’s partner with the SBA to regulate nonprofits and promote economic development within their communities. Borrowers can receive up to $20 million from a bank, and $5 million from a CDC. The funds can be used to purchase, construct, or improve commercial real estate, or purchase equipment.
 

SBA 7(a) Small Loan

If you’re in a time crunch or you’re looking for a smaller-size loan than the options listed above; the SBA also offers smaller 7(a) loans from $100,000 to $350,000. This program provides accelerated application and processing times, and can be used to refinance existing debt, purchase equipment or machinery, supplement working capital, and more.

United States Department of Agriculture (USDA) loan

USDA loans are another example of a government-backed small business loan. These loans are specifically tailored to small businesses in rural areas and the funds can be used for growth and development, machinery or equipment purchases, debt refinancing, and real estate purchases.

Small Business Term Loan

A term loan, or installment loan, provides the borrow with a lump sum of money they must pay back in set amounts, plus interest, over a pre-determined period of time. Term loans typically have a standard repayment schedule and fixed interest rates. Once the borrower has paid the balance of the loan off, the account will close. Different loan terms might be offered depending on how you plan to use the funds and how much money you’re seeking. Short-term loans are often repaid within 6 to 24 months, while long-term loans offer the borrower three years or more to pay back their debt. Short-term loans are generally used to bridge cash flow gaps or purchase inventory, and long-term loans are typically reserved for larger investments such as remodeling a building or purchasing new property.

Small Business Line of Credit

A business line of credit is a revolving credit line for a business owner to use as needed, pay the debt back, and then borrow again. Unlike a traditional term loan, you can pay back your debt and continue borrowing funds – up to your limit – without reapplying each time you need extra cash. A business line of credit is designed for supplemental short-term funding, e.g. to help meet payroll, bridge seasonal cash flow gaps, lease or equipment expenses, and more. However, many business owners open a line of credit to use as a “safety net” for when unexpected expenses or emergency situations arise. Like a credit card, you only pay interest on the monies you actually use. If you never use the funds, you typically won’t incur any interest charges.

Small Business Credit Cards

Starting up and sustaining a business requires money. When you’re in the early stages of starting your business, costs add up quickly and acquiring business financing can be a little tricky. Without sufficient business credit, your options might be limited – but a business credit card may be a solution to help get the job done. A business credit card can provide you with the working capital you need, help your business build solid credit history, and offer you perks and rewards for purchases you would be making anyway.

Established business owners should also consider a business credit card if you don’t already have one. You can use your credit card for everyday business expenses and rack up rewards points or cash back on your spending. In addition to the rewards, there are other benefits you can take advantage of like free employee cards with spending limits, allowing you to simplify your employee reimbursement and reporting processes.

Real Estate Loans

Small business real estate loans provide funding for new construction or to purchase or refinance an existing property. There are several types of real estate loan options available; your banker can talk with you about the location and usability of the property to match you with the right loan type for you. Interest rates are typically low and repayment terms are usually between 15 and 30 years, but with any real estate loan, the property you purchase serves as collateral for the loan.

Small Business Letter of Credit

A letter of credit is a bank guarantee that a specific obligation will be paid using the bank’s credit. The bank is a neutral third party in a trade between the buyer and the seller. During a trade, the bank serves as an intermediary for payment, issuing a letter of credit. A letter of credit is an alternative to putting up a cash or performance bond and can minimize risk for both the parties in case something goes wrong during the transaction.

Letters of credit are available for both domestic and international transactions.

Business Loan Calculator

Before you start your application process, it’s wise to have a good understanding of how much debt is feasible for your business to take on. A certified professional accountant (CPA) can help you determine the amount of money you need to achieve your goals and how much is wise to take out in loans. To get an estimate of what your repayment schedule could look like, use one of our calculators below.

• Business Loan Payment Calculator
• Business Loan or Line of Credit Calculator

How to Get a Business Loan
If you’re ready to take your business to the next level, we’re here to help. Check out our commercial and small business loan options or contact a banker today. We have several online application options and will work with you to find the best solution to fit your unique needs and business goals.

About the Author, Josh Holder: Josh is a Commercial Relationship Manager at SouthState Bank, with more than 15 years of experience. As a Commercial Relationship Manager, he is able to fulfill his passion for providing solutions and education to help business owners and financial professionals achieve success. In addition to his banking career, he serves on the Steering Committee for the Emerging Bank Leaders group of the Virginia Banker’s Association and is an active member of the Greater Richmond community.

1. Small Business Lending Statistics [2022] Understanding How Lenders Approach Small Businesses – Zippia
2. 7(a) loans (sba.gov)
3. 504 loans (sba.gov)