Business Loans: An Overview

April 25, 2012 by  Filed under: Loans 

You may have superb ideas, a unique suite of products, great know-how and dedicated staff but without solid capital to cover running costs, staff-hire, utilities, rents, equipment and machinery purchase or lease, your business venture may not take-off. Also, mere take-off is not enough, you should have enough financial reinforcements to ensure that your business can be maintained and sustained till it begins to grow and pay off. Availing of a business loan is the best solution.

There are many agencies which offer loans for commercial ventures. Primary among these are banks and financial institutions. Other agencies include venture capitalists, personal loans, “no-documentation” loans, merchant cash advances, small-business financing, credit unions, etc. One major difference between all these is whether the loans given are secured or unsecured.

One of the first requirements in securing a loan is to have a definite business plan. Lenders also conduct independent research into the personal credit-worthiness of borrowers, the kind of security or assets offered as collateral and the background of the borrower in terms of know-how and experience and the actual viability of the business plan.

Some categories of business loans are:

Secured: The borrower pledges certain valuable assets which the lender can take over in case of default of the loan. These could include house, vehicles, property, company shares, personal monies, jewelry, etc.

Unsecured: These loans are given without any collateral security, based purely on the credit-history and character of the borrower. However, interest rates may be higher and these lenders may not be subject to normal federal laws and regulations.

Start-up funding: Such loans are purely given for start-ups and often the lender may insist on securing part ownership of the company in lieu of collateral.

High-Risk: If for some reason your credit-worthiness is below par, some institutions may offer high-risk or bad-credit loans. Here the assumption is that the borrower is bound to default, so the interest rates, down-payments or processing fees may be very high. These loans can severely affect your credit rating if you default

Short-term: These business loans are for immediate use to tide over an unforeseen circumstance. You should be sure that you can repay in the stipulated time period. However when availing of these, it’s important to know that the interest rates and collateral demanded are very high.

Special categories: Women, ethnic minorities, heritage arts and crafts, local produce supplies processing etc are other categories that can avail of business loans.

Whether yours is a brand-new start-up or you’re expanding/enhancing an existing business, securing finance through a business loan is the cornerstone of success.

If you want to avoid a lengthy loan process with hidden fees and no guarantee of approval, use simple and straight-forward process for Business Loans and Restaurant Loans. A merchant cash advance is a great borrowing decision for many Small Business Loan.

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