Bussiness loans
A business loan is defined as the loan given for starting or expanding the existing business. It is given for specific time and needs to be returned back along with the interest specified. Business people can apply for many different types of loan depending on their needs and requirement. The different types of loans include: Secured & collateral loan: This loan requires you to put up some guarantee. It may be some property or some savings. If you fail to repay the loan, the lender can take your property or savings; Unsecured loan: This loan given just on promise to repay it back on time and with proper interest rate. It is the most risky form of loan. It is mostly given to the running business houses based on there credit worth in market.;
Government loans: This form of loan is usually given to Women entrepreneurs, small business ventures and minorities. This loan is secured by government and given only if the borrower can assure an overall development of community with his business.Specification of Business loans: Acquisitions loan; Capital loan; Commercial property loan; Equipment loan; Inventory loan; Franchise loanDifferent sources for loan:; Banks -Private and commercial; Government loan options/ Government grants and aids; Small Business units providing business loan;
Private lendersbusiness loan for new business:At times people apply for personal loan rather than business loan to set an up a new business. In case of new business getting a business loan is little difficult. A business credit is very important criteria for business loan. If you are planning to start up business, the best thing regarding finances is to have your own money if not completely then at least 50%.Try to save money, try to be frugal. But if self financing is not possible, then before going out to find a lender prepare yourself with following things:; Complete and concrete business plan with budget is must. Business Plan should focus on earnings.
Try to get certification of all the paper work required for loan.; Check and recheck your plan, take help and advice from informed people. Revise as necessary. Take the help of Small Business Administration. Maintain Business financial statements.; Also maintain personal financial statement. Keep ready your Personal tax returns. Ask for enough money as to meet your realistic needs.; If you need a loan for 1 year, ask for 2 years to be on the safer side. You also need to have a good personal credit rating.
The lender needs to know the credit history and the track record of borrower as it serves as a person's gauge for credit worthiness. Show your positive attitude. Be optimistic. Once you are ready with plan and financial statements second step is plan and rehearse your talk, you will be more impressive if you are careful and know your plan as the back of your palm. Bring helper if need help (like accountant if you need financial help to convince lender).Be prepared to tell why and how much money you need. Give them some detail. Also have a concrete repayment plan. How fast you can start with repayment. Lenders appreciate that you are thinking about paying them back instead of just getting the money.
All lenders want to know as much as possible about your plan; they don’t expect any surprises or loopholes in plan.Once the loan is sanctioned half battle is already won. Act like a good customer, keep your lender informed about the latest happenings whether good or bad. Provide him with latest financial statements. Stick and adhere to the agreement. If because of any reason you are unable to make a loan repayment installment, call and tell your lender well in advance, tell him the problem and request for the extension. Explain the sources of repayment. Business loan for existing business: For existing business loan can be taken for; Purchasing real estate.
The term for loan is 25 years; Loan to buy machinery, equipments, furniture and renovation of office or factory can be taken for 10 years.; Loan to purchase inventory can be taken for 7 years.; Working capital loan is also applicable for 7 years.Checklist for existing business loan:; Personal and business financial statement.; Copy of last3 year’s business and personal tax returns along with Fiscal year end business financial statement.; Information regarding Profit and loss of business along with the projection in coming years.;
History of Business along with other information like number of employees, business expenses etc.; Post dated cheque hold harmless certificate; In case of partnership firm take partnership deed.; In case or limited company take Articles of Incorporation
Important terms associated with business loan:; Venture Capital gives loan in return of partnership in company.;Asset Based Financing is form of collateral loan. Letter of credit is the guarantee taken by bank to honor certain cheques incase of insufficient funds also. Lines of Credit is provided by commercial banks to there customers to maintain cash flow in business. It is short term loan.
Small Company Offering Registration is selling of stocks and shares in market to fight against financial crunch. Long Term Debt is repaying loan and interest in equal installments.
Floor Planning is a form of asset Based Financing. Companies take loan against there inventories.Research is the key point for applying of loan.
Before applying for loan try to find regarding government grants and aids. If no grant or aid is available then find out about all the loan options available in your state. Concrete plan along with proper research will surely help you to fetch the business loan.
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