Borrowed capital is important aspect of any business. When you want to expand your business or just need money for regular glitches, business loans comes to handy. With the improvement in the economic outlook, a business owner may get different types of business loan for his specific need.
There are many kinds of business loan which cater your needs for funds. However, you must be aware of the fact that wrong choice of loan might cause you additional costs. When you are looking for business loan you have many options of lenders ranging from Banks to non banks and also personal credit card facility. Check out our latest post about the Top 5 Benefits of Business Loans.
When you approach a lender for business loan, he gives you options about the type of loan arrangement you can avail. However, you must be aware of the types of business loans available in the market so that you choose right.
Top 5 Types of Business Loan
This is the most conventional form of loan available in the market. These are long term loans with the intention to buy heavy machinery or equipment for the business. Term loan has fixed or floating rate of business and fixed repayment schedule. Repayment of loan is done in the form of installments which is pre decided for monthly, quarterly, semi annually or annually.
There is margin requirement of 15-25% in case of term loans. In other words, the total loan amount is restricted to the 85-75% of the total expenditure. The general tenure of Term Loan is 2 to 10 years.
Line of Credit Loans
This is the most useful type of loan for small business units. This loan arrangement generally availed by the business men to cater their need cash for small terms. When you need to stock inventory or cover the operating costs, Line of Credit loans comes to rescue.
The interest rates on Line Of Credit loans are low since the banks face lowest risk on this kind of loans. In fact, some bankers insert additional clause in the agreement that loan will be canceled when found something negative about the business operation. Line Of Credit Loans are advanced to the business men in his account and interest is charged on the total amount of loan.
This is very popular form of loan since ancient days. Indian women possesses large amount of gold ornaments. Gold loans can be secured easily with gold jewelry, coins and biscuits. This type of loan can be used for any purpose, like buying car for business, daily used objects for business office or anything.
The tenure of Gold loans is 12 to 30 months according to the need of the borrower. Gold loans have achieved popularity in recent times since no property is required as collateral in case of gold loan and idle lying ornaments in the home can be used to secure loan.
This form of business loan is very popular these days. The unique features about this loan is it is repaid in one balloon installment. The lender of the balloon loan makes very specific research about the applicant and business owner with approved record and concrete business ideas are selected for balloon loan.
Disbursement of loan is done when application. Interest is paid at regular intervals to the lender. This loan is called balloon loan because the principal amount is paid on the final day of loan life with a ‘balloon’ installment. this type of loan is useful when you are expecting lump sum payment at particular point of time.
Government loans are very helpful when it comes to business loans from reliable lender. SBA loans are not completely government loans infact they are partially guaranteed by Government in order to encourage small business owner to opt for this kind of loan for business opportunity. There are many kinds of SBA loans which can used for most purposes and can be applied through many SBA lenders. 7(a) loans, 504 Loans and Micro Loans are some popular kind of SBA loan.