Have you been thinking about beginning a new business but the absence of adequate funds has been disturbing you? Then getting a business loan is the answer to actualize your dreams. A business loan gives financial assistance to all sizes and types of business, helping them get started, expand as it’s growing, or get them through the tough spots that happen from time to time. The most common type of loans are short, medium and long term loans.
Short-term loans are granted to businesses that require money to begin their operation, and this loan is granted for a period of one year or less. Medium term loans assist businesses to cover the majority of their bulk expenses and also purchase equipment for the business which is usually given for a period of 1 to 3 years. Long-term loans are basically used to assist start-ups with initial expenses and are granted within the time of three to seven years. Other types of business loans include:
- New Project Loan – Banks are keen on financing new businesses and also for new projects of on-going business. There are different principles for each bank or financial institution when it pertains to getting a new project loan. Project loans are authorized against the collateral of the individual like commercial or residential property, a land, etc.
- Top-up on Existing Loans – These loans are granted for replacement, expansion, or diversification of an on-going business. These loans are granted for short term or long-term periods to purchase goods, machinery or any kind of fixed assets for the business.
- Working Capital Loans -These loans are given to businesses to tackle sudden financial emergencies and are to be paid within a short time. Banks are progressively concerned in giving working capital loans against their shares, stocks or receivable bills of the organization.
- Secured Business Loan – This is a business loan in which organizations increase their capital against any security for the bank. It might include lands, commercial or residential places, shares, gold, bills or insurance as collateral to get finance for the business at a lesser interest rate.
- Unsecured Business Loan – The majority of businessmen can’t stand to promise security in acquiring a business loan, so bankers tend to assist them with loans with no security based on income tax returns and bank transactions. These loans are debited with higher interest rates when in comparison with secured business loans.
Business Loans have a high ability to assist with managing your funds and capital by giving stress-free repayment alternatives. The monetary aspect of each business creates an essential part of it. So, if you are preparing to request for a Business Loan, you need to look into these three essential aspects: –
- Loan Size: You have to determine the exact amount of loan that would take care of your business needs.
- Cost: The risk and cost involved must be thoroughly checked before acquiring the loan.
- Payback Program: It is essential to choose the kind of program you would want your payback to be scheduled on as at when acquiring the loan. Be it monthly or quarterly, to avoid future issues.
When requesting for a loan, you need to make sure you create a proposal. This is because money lenders would give you the loan only if they find your proposal worthy as no lender will be interested in taking the risk. While composing a loan proposal, you should always give industry-specific details so that the lender is able to fully know how you plan to start or keep on running the business, and also know the kind of market trends that would alter it.
You ought to likewise give insights regarding the current or proposed business, collateral which you need to keep as insurance with the bank or lender, loan reimbursement plans, financial statement and summary of your future activities. Having a good proposal together with all these would not only make it easier to convince the lender about your future business plans, but also increase the possibility of getting the loan.
One of the things that prevent most individuals from attempting to get a loan is fear of rejection. The best way to get rid of that fear and ensure success in getting your business loan is to know what to expect and be prepared. Simply go to your bank or financial institution with a well-drafted business plan, ensure your credit is up to standard, and if you know of any bad situation on your credit record, be ready to explain them.
Lenders are individuals too, and they know that there are circumstances that are inescapable. However, if you can convince them that all your problems were in the past and you are properly balanced, it would help a lot in acquiring that loan you’ve always wanted.