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
- 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.