How to choose the right loan to expand your business

The most important step when choosing a loan to expand your business is putting together a good team, says Pete Collins, senior vice president of commercial lending with Home Savings Bank.

"You might be a great company with great development ideas, but if you don't do your homework and find the best accountant or the best attorney for you and your business, the plans may never take off," he says.

Your banker can help determine what type of loan is right for your business needs. Permanent real estate loans, for example, are available for long-term financing of properties, such as owner-occupied businesses. These are owner-occupied loans, so the business owner must occupy 51 percent or more of the building they plan to buy.

Construction real estate loans, on the other hand, are offered for expansion, remodeling or renovation of existing properties, or for constructing new facilities. Some construction loans are offered for 24 to 36 months, depending on how long it takes to complete and lease the project.

"For owner-occupied projects, it generally doesn't take longer than nine to 12 months," says Collins. "The benefit of this loan is that you don't have to borrow everything at once. Instead, you set up a monthly draw, that way interest is only charged on the amount borrowed until construction is fully finished."

Collins advocates building a relationship with a trusted banker who can help you make decisions about your business's finances. "It's so important to determine what you want and what you need when it comes to loans. The sooner you get your plans to the banker, the better, because this allows you to use your time with him or her efficiently," he advises.