One of the things that stops most people from attempting to get a loan is fear of rejection. Knowing what to expect can alleviate that fear. Information about an Outline of Personal and Business Loan Categories and their Uses can be retrieved by clicking at http://www.invisibleconnect.com/an-outline-of-personal-and-business-loan-categories-and-their-uses/
A business loan is the answer to most business needs. It doesn’t matter what size a business is, almost every business owner at some point has to consider a loan. A business loan can help a business get started, expand once it’s on its way and growing, or get a business through the tough spots that happen occasionally.
A Bridge Between Credit Cards and Business Loans: Lines of Credit
A line of credit operates much the same as a credit card. You apply for a business loan line of credit and based on your qualifications you are approved for up to a certain amount. You are not charged on the loan until you actually use the money and are only charged for the amount you actually use. Another similarity between lines of credit and credit cards is the loan is often an unsecured business loan meaning no assets are used to guarantee the loan such as homes, cars, the business itself.
This may seem like a plus at the start because the monthly payments are so low. The catch there is that lines of credit to not extend forever. There is almost always a set number of years for the loan amount to be available. At the end of that time (and sometimes within the last two years of the payback) money is no longer available. After that period, the payments are higher to make sure the money is completely paid back by the end of the loan.
On the downside those interest rates are usually variable like a personal credit card and go up or down over the period of the loan. Another downside to lines of credit is that like a credit card your payments will usually be only a little more than the interest rate each month.
Traditional Types of Business Loans
Even if you do not have an extensive amount of credit, and if you don’t think a line of credit is right for you, all is not lost. There are many more traditional styles of business loans to choose from:
– Working Capital Loans: These loans are what most people think of when they consider getting a business loan. They come in two types: Secured and the unsecured. The unsecured loans for the working capital are sometimes available to all possible business owners having a stellar credit, a sound business plan, and an established business with a proven track record. If you intend to get detailed information about a sound business plan, click here.
– Accounts Receivable Loans: These are short-term finances made available when you hit a rough patch and now you have money coming in at a particular time. Your business’ records of accounts receivable act as a security for such loans. On the downside, the interest rates of these short-term loans are usually higher than a long term standard loan, and you can end up in a vicious circle of using your assets (receivables) before you get them and then not have money left before your next income period.
– Business Only Loans: This type of loan is applied for using the capital and assets of the business alone and not any personal credit or credit history of the owner. It is only available to a business with a solid record of reliable income, the long-term prospect of fluid operation, and very strong business credit scores.