In financial terms, a loan can be defined as a fixed amount of money given to a person by a lender, which will have to be returned to the lender in a given period of time. And depending on who the lender is, the interest could be imposed on the business loans. The lender also decides the interest rates.
There are many types of business loans, such as unsecured business loans, credit loans, equity loans, etc. A business loan is usually taken by businesses that are just starting out or by small-scale businesses. These loans serve as financial assurance for businesses. As such, business loans help entrepreneurs start out their businesses by providing the required financial assistance.
There are several options available in terms of availing of a business loan. As such, the main types of business loans are:
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Bank Loans
These types of loans are only offered by banks. The bank itself also decides the policies and the terms and conditions of the loan. So, in order to avail of a business loan from a bank, the bank will usually inquire about your business and how you plan on growing your business and making it a successful one. And this enquiry is usually made so that the bank can gauge if you will be able to repay the business loan. The bank may also sometimes ask for receipts regarding business registration proof and various other documents.
Taking a business loan from a bank is a tedious task as many formalities need to be completed. Hence, the time taken to finalise the loan is very long. However, a business loan from a bank typically has lower interest rates that benefit the business owner.
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Credit Card Loans
Credit card loans are another popular type of loan that is incredibly beneficial for small businesses. These loans are not only offered by banks but also by independent lending firms. As such, the processing of these loans is faster when compared to bank loans. And these credit cards are used for operations related to the business only. As a result, an organised record of all expenses related to the business is kept through these credit cards.
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Unsecured Loans
These loans have recently gained popularity because of their easy accessibility. These unsecured business loans are often rendered by independent lending firms rather than by banks.
These loans are given to the borrowers after the financial history of the borrower has been checked. And the processing time of such loans happens quickly once the loan has been approved.
What makes these loans different from traditional loans is that these loans do not require any assurance. This means that the lender does not require you to submit your asset or any other form of security. Besides, these loans are provided not only to small businesses but also to pre-existing businesses that require financial aid.
As these loans are also offered by institutions apart from banks, business owners have many options open to them. Hence, they can go over each lender’s policies and choose which lender they would like to avail of the loan from.
Starting a business can be a huge step that requires stable support to ensure long-term benefits. As such, business loans are a small part of the financial aspects of your business that can boost your productivity and help you create a successful business.
Author: Steffy Alen
