What
Are Business Loans?
by: John
Williams Business loans can be defined
as money lent for a specified amount of time at
a specific interest rate to a specific person
or people that operate a business or plan to operate
a business. This definition is very broad, but
so are the various types of loans available to
business people. Deciding on which type of business
loan that you and your company will benefit from
the most is very important. Often times, a start-up
business or someone that has never owned a business
will find themselves more or less applying for
a "personal" loan. This can be a very risky endeavor,
mixing business loans with personal loans, however,
often times it is the only available means for
first time business owners.
One of the first things personal business owners
need to do is establish business credit. Business
credit can help you get a business only loan without
using your personal credit. Establishing business
credit can be done by:
1.) Opening up a business credit card account
and paying it in full.
2.) Buying equipment and supplies from companies
that will report good standing to the business
credit bureaus.
3.) Having a good business plan with potential
earnings, letters of intent, and any type of customer
contracts already laid out.
All of these types of endeavors can help in receiving
a business loan. Often times, financial institutions
require in-depth business plans, be prepared to
spend days working on just the certification paperwork
prior to applying for a business loan. A business
only loan can be obtained in the business name
without use of personal credit as long as the
business can justify the loan amount and the ability
to pay it back.
There are several different types of business
loans available, ranging from those secured with
collateral, non-secure loans, which are based
upon the credit worthiness of the applicant, and
even government loans for small business ventures,
women and minorities. Government loans are those
loans secured by the government; in most instances
these loans are available when the business or
owner can prove that the community will prosper
based upon the business at hand. For the most
part, government loans are based upon personal
credit.
The basis for which you may need or require a
business loan may vary. Some of the most common
business loans available to business owners are:
- Acquisitions or a loan to acquire an existing
business
- Inventory loans
- Account Receivable Loans
- Working Capital Loans which converts a companies
assets into working capital
- Equipment Leasing
- Commercial Property loans
- Warehouse financing
- International business loans
- Franchise loans
One of the most important tools when deciding
on what type of business loan your company needs
is research. Researching the different types of
loans available to you and your company can save
you money. First, look into the different type
of business loans available to you in your state.
Many states have government loans available; some
even offer grants, which is money available for
specific purposes that do not require repayment.
Research the different type of Federal loans available.
You can do this at the following website: www.sba.gov.
Call your local bank and investment companies
regarding the business loans they have available
for you. Many times, business loans are not that
hard to acquire. With research and a good business
plan, your dreams may come true. |
