Business loans are the loans availed by business houses for getting working capital and also fulfilling the aspirations associated with expansion of the business. Business loans also imply the periodical redistribution between the lender and the borrower of the financial assets.
How to get approval for business loans?
In many instances, the technique of getting business loans may be quite tedious. There may also be certain limitations and tricky conditions involved. However, with a bit of research and preparation, your business loan approval need not be a distant dream.
• Collect every form of documentation that is necessary. Banks or other financial institutions have an affinity for numbers and finance records do count a lot. Get bank statements, tax records, profit or loss statements, documentary proof of ownership if the business had been purchased, and other related statements to prove the authenticity of your organization as well as a sound financial health.
• Prepare your sales pitch directed towards your lender. Your “presentation” (sales pitch) should give the bank a clear picture of the business purpose of taking the loan, as well as the affordability for repaying the loan.
• Have a well thought out and nicely written business plan ready to show to your lender. Your past business objectives, achievements, your currents plans and visions, cumulatively will give an idea about the way you want to use the loan as well as your repaying capacity.
• Try to have a clean record of your personal and business credit. To get the best terms and rates for your business loan, make sure your credit history, both personal as well as business are good.
• Having collaterals like trucks, machines or buildings increase the approval chances for a business loan.
Interest rates for business loans
Business loans interest rates generally vary. The factors that usually come into consideration are:
• Degrees of risk involved with the business loan
• Different loan tenures
• The loan’s tax considerations
• Purpose of the business loan, whether for business refinancing, or business purchasing.
If higher risk is involved with the business loan, then interest rate will be higher, and vice versa when risk of the loan is less. If it is a business mortgage loan, naturally less risk is involved which means reduced interest rate. The longer is the duration of the loan, higher is the interest rate. Interest payments for business loans which have been taken from the government have tax exemptions. These types of loans have lower rates of interest.
Types of business loans
Secured loans: In these kinds of loans, certain assets are promised by the borrower as collateral for getting the loan. In situations of a loan default, the creditor secures the possession of the thing that the borrower has pledged with (collateral).
Unsecured loans: Unsecured loans are obtained without the support of collateral.
Other types include business start – up loans, and loans taken for business takeover among others.
Taking loans, either for business or personal use has become the trend of the modern economy world wide.