A business loan can simply be defined as a type of money lent to a financial organisation for a specific purpose. Loan as the been one of the major
A business loan can simply be defined as a type of money lent to a financial organisation for a specific purpose. Loan as the been one of the major money used to revive a business suffering from funds to execute daily operations.
Most time, these loans are referred to as capital offered to small businesses for definite startup of organisations.
Without the aid of loans, some popular businesses existing today won’t be known at all because there won’t be enough capital to execute core tasks in the industry.
A business loan works inform of assisting the present negative situation of a firm for future development with fixed interests.
Major types of small business loans
In this business world, there is a popular type of loan practised by entrepreneurs and pre – entrepreneurs.
1. Business line of credit
This type of loan is popularly known as a soft loan that allows pre – entrepreneurs to pay back interest based on the specific amount of money borrowed.
In other words, the interest that will be paid later relies on the capital borrowed.
With nature is this type of loan, it is one best loaning systems that benefit pre – entrepreneurs a lot by keeping interest amount specific and easy to pay.
2. Terms loan
Term loan is another major type of small business loan that enables pre – entrepreneurs and entrepreneurs to pay backs at a specific fixed time attached with the interest.
On the other hand, it mostly includes paying back the loan with interest a monthly basis ( Every 1 month, 2 months, 3 months and 6 months).
3. SBA ( small business administration) loan
Small business administration loans are a type of loans that are of low interest which are mainly powered by the governments.
Also, the process to obtain this type of loan is pretty complex. Before one could be approved of the money asked, it usually take some time.
Entrepreneurs who need money at a low interest rate but not immediately is advised to go for this type of loan.
This can also be called Microloan. This type of loan does not allow a large amount of money to be borrowed.
Specifically, the amount that can be lent out is ranging from $30,000 to $60,000.
For microloan, it best for businesses that are just starting up since the money required is of low amount.
5. Short term loan
This type of loan lends money to business owners at eases without going through much stress. Short term loans are also like the SBA loan that offers money opportunities to entrepreneurs in just simple procedures.
STL offers a loan of below $600,000 to the businesses. If you need quick money to solve an urgent problem in your organisation, by new thing or exploration. Then this type of loan will be best do you.
Important small businesses loan requirements that must be provided
There are some things needed when thinking of applying for small business grant, majority of them will be highlighted and explained below.
1. Valid statement of bank account
When applying for any business grant, providing a statement of bank account is very compulsory. Without the aid of this document, Institution where loans are to be obtained from will find it difficult to approve you of the money intended to be borrowed.
The statement of account record obtain from banks could be from 6month, 1 year, 2year, e.t.c
2. The type of industry
All organizations can’t be based on the same particular thing. Before a business loan can be approved, an entrepreneur is required to vividly state what his/she is based on, or the type of business it is.
This aid banks to know more about the business one is into which provides more chances of getting approved.
3. Available collateral
These are the things that boost the confidence of institutions that offers loans to entrepreneurs. To be able to seek for a valid loan, there is a need to provide some collateral like; house, cars, real estate, e.t.c.
4. Profit and loss statement
A business that has been in function for some time will have a profit and loss statement documents. This type of document is used to signify how organizations tend to manage business profit and loss. An of an organization that experience frequent loss may be denied of business loan due to lack of management in inputs and outputs.
5. The accurate number of year’s the business was established
The specific year at which an organization is established is mainly required when applying for a loan.
A business that has been existing for a long have more buoyancy in getting approved for a business loan than a shorter business.
Note: The accurate year at which the business is established and not otherwise.
6. Highlighting and enlightening of business plans
Business plans help banks and other financing institutions to have the required knowledge on what money acquired will be used for. It also helps to
Know the specific amount of money needed to complete the project intended to execute.
When statins business plans, make sure all things listed are true and not trying to fake some things. The is because once any false claim is noticed by the bank, you may be permanently denied from the business loan.