Let yourself grow with US fund source
After getting a perfect idea, money is the main thing that can help one to succeed in the business. Various financial aids are available nowadays.Small business loans, often termed commercial loan is a type of loan which is provided for business purposes, especially for the small-scale industry. These business loans often provide a helping hand to those business industries that are on the verge of sinking. It is also a savior for those looking for a new start-upbusiness.
The loans that are provided for the small business loans category are of two types, secured and unsecured. The type of loan offered by the lender depends on the type and amount needed. In the case of secured loans, collateral has to be provided to the lender. The main advantage of using small business loans is the approval rate and speed.
Most of the time, these loans are provided at a faster rate. The number of documents that have to be arranged for the loan is less. It is another advantage of using small business loans. The collateral has to be provided if the person who needs the money opts for a secured loan. Or else there is no need to provide any collateral for getting the loan.
Various types of small business loans
1.Small Business Line of Credit
These are loans similar to that of the credit cards that are used. Money is lent up to a fixed limit and only the interest amount has to be paid off. In the case of small businesses, if the money borrowed is to a small credit limit, it can be well paid off within a particular interval. Also, money can be lent again as long as it does not exceed the credit limit.
2. Accounts Receivable Financing
It is a type of financing where the outstanding invoices are sold out to the lender and receive an advance payment. The amount of money lent depends on the quality and the lifespan of the receivable. By accepting the receivable in exchange for the money, the moneylender takes a huge risk. The advantage of taking up this type of loan is the ready availability of cash. But the main problem associated with this loan is that the debtor ends up paying off more money to the creditor when compared with other types of loans.
3. Working Capital Loans
These are loans provided for smaller amounts for a very short duration of time. These types of loans are used for the working process of a business daily such as debt payments, rent, etc…
4. Small Business Term Loans
These loans provide a fixed capital amount to the debtors. These loans are to be paid off regularly at a fixed interest rate. Usually, these types of loans are provided to the debtors on a 5-year repayment policy. This type of loan is similar to the loan taken for the car, where the initial payments go to the interest.
5. Equipment Loans
These are loans that help the small-scale industry deal with the purchase or exchange of equipment. When compared to other types of loans, equipment loans require a lesser number of documents. Also, the funds are issued at a faster rate.
Requirements for receiving small business loans
Scores of personal credit cards are really important for a debtor to get the money. Moneylenders often take a look at these scores before giving the loans. This score helps them decide whether money has to be lent or no not. Personal credit cards show off the repayments of the previous loans of the debtor. If the score is high, then the chances of getting the loan are also high.
A credit score that is good makes it less risky for the lender to give the money to the debtor. If the score is 700 or above, it is a good score. If it is 800 or above, then it is considered excellent. If the bills and debts are paid off regularly, then the chances of increasing the score of the credit card are high. Also, the balance on the credit card and other associated cards is advised to be kept low for getting a good credit score.
Try not to apply for many credit cards as it may impact negatively on the credit score. If the number of credit cards is way too much, it will lead to a hard enquire. It may eventually result in lesser chances of getting the approval for the loan.
To increase the chance of getting approval for the loan, one has to fulfill the minimum requirements that the lender places. Even though some of the lenders are flexible, in most cases, they are strict about the credit score. Some of the lenders also look upon the experience the debtor has in the field of business.
Along with the credit scores, all the legal documents have to be submitted with the application. Tax returns, bank statements, business plans, etc… are included in this set of documents. With the help of a business plan, one can show the lender the various procedures involved with the business and how the money is going to be used for doing the business.
At times, the lenders ask for collateral to provide the loan. By providing the collateral to the lender, the owner of the collateral gives away all rights to take hold of or sell the collateral. Any equipment or land or any other property can be given as collateral to the lender.
Loans are much quicker when applied through online lenders. This type of loan is used when the traditional loan system is hard to obtain. Appling through commercial banks is the best option for vendors who are trying to up-bring their business. Also, these banks offer amounts at a lower interest rate. But the main problem is that one should have a good credit score to get a loan from commercial banks. Community banks are banks that are operated locally. They look upon the complete credit report before giving the loan which is advantageous to the debtor.
