7 TYPES OF BUSINESS LOANS YOU CAN ACQUIRE
Business loans are loans specifically intended for business purposes such as purchases of inventory, payment of recurring operating cost, working capital and business cycle needs. Business loans can be obtained either from the government or financial institutions which include banks, saccos, insurance companies,brokerages, investment companies as well as credit unions. There are different types of business loans an entrepreneur may obtain. They include.
Secured and Unsecured Loans
Unsecured Loans are offered when the lender knows you well, is convinced your business is sound and the loan will be repaid on time without any collateral used as secondary payment. Secured loans however, have high interest rates compared to unsecured loans and collateral attached to them which may be used as compensation should you default payment.
Bank Term Loans
These are the most basic business loans. They are however unavailable to businesses with bad credit history or are new to the industry. The bank dictates the terms and conditions of these kinds of loans based on longevity or prosperity of your business. New and small business are disadvantaged in this kind of loan since the banks are in doubt of the business success.
These are loans where both the interest and the principal are paid with a single‘balloon’ payment. Balloon loans are usually reserved for situations when aa business has to wait until a specific date before blooming.
These are business loans paid back with equal monthly payments covering both principal and interest. They may cover business needs since they are mostly short-term
loans. An instalment loan is occasionally written with quarterly, half-yearly or annual payment when monthly payment is inappropriate.
General Purpose Business Loans
These are government offered loans and are rendered to business owners with great credit history who need long-term financing for a period of 10-25 years.
Non -Profit Business Loans: Community-Based Loans
These are also government offered loans rendered to women and minority small businesses that need small amount of capital.
Line of Credit
These are the most popular loans as they require short procedures and little wait time. They may be fixed or revolving and carry the lowest interest rates of all business loans. They are also short-term loans which are not intended for the purchases of equipment or real estates.
Lastly there are many more different types of loans which are determined by a number of factors. It’s up to you to consider the reason for loans, business longevity,credit history and other factors before deciding whether to acquire a business loan. The available different types of business loans have different qualification requirements, interest rates and terms as well as uses. Theyhowever cannot be used to pay of other business debts.