They also anticipate that as a result of borrowing, their earning power will be enlarged and they will be able to service the debt from the resulting higher income. Businesses borrow for different purposes and for different time periods. Short-term borrowing can be used to cover temporary increases in inventories and other working capital needs. It can also be used to pay taxes or the money can be borrowed with anticipation of more permanent financing. Long-term borrowing can be used for expansion or renovation or to cover a permanent rise in working capital requirements.
Commercial banks offer a wide range of lending services.
Generally, large city banks make more business loans than the smaller, rural banks, which may lean towards agricultural and consumer loans. Banks will also lend on account receivables and sometimes purchase receivables outright. This specialization has further expanded the use of credit in the United States. As an alternative to borrowing from a commercial bank, small businesses can take advantage of the loan programs offered by the Small Businesses Administration. The lenders credit standards and the needs of the borrower determine the type of loan and the channels of credit that are used.