Thursday, 11 October 2018

Types of business loans that you can apply for


Loans have made it easier to persuade the dreams at an easier and faster time than usual. Start-ups are fortunate these days to get the loan when the proposed plan is promising. While planning for a business loan, let’s understand the types of business that are available across.

1.Term loan
A term loan is the one where the loan is provided for a specific period mostly between two years to ten years with the interest rates agreed upon which can be fixed or floating. This is an unsecured type of loan and hence the risk probability for the lender is more.

2.Loan Against Property
If the borrower has a property that he or she can keep as the guarantee, it becomes easier to get the loan. The valuation of the property is done and the loan amount is sanctioned according to it. This is a secured type of loan and usual tenure to maximum is seven years.

3.Gold loan
If the borrower has gold jewelry or gold coins, even those can be kept as the guarantee against the loan amount that is sanctioned. When there is immediate and small amount crunch, this act as the best option as it is processed faster compared to other loans and the tenure is a maximum of two years.

4.Loan Against Shares or Financial Securities.
Bonds, shares, financial asset classes, fixed deposits, insurance, mutual funds also act as the loan guarantee. If an individual has any of this, then singularly or collectively they are kept against the loan amount that is borrowed. The interest rates here are again fixed or floating according to the mutual consent of lender and borrower. The tenure here also is lesser compared to term loans but can be more if compared to gold loans.

5.Cash Credit Facility
Cash Credit Facility is getting the cash instantly. These are smaller amount loans. Again an unsecured type of loan that is given after many checks and the after seeing the potential of the business. Tenure is lower than five years. This can be a good option if someone is applying for a personal loan bad cibil score.
6.Letter of Credit (LC) Facility
Either banks or a guarantor gives a letter of credit which states the credibility or an individual who is running the business. This has a lot of consideration from the past credential of the borrower.

7.Equipment Loans
There two types of equipment loans. One that is taken to buy the equipment and other is taking loan keeping the existing equipment as security. In the first case, it becomes an unsecured type of loan and in the second it’s a secured loan. If the basic business is established, these loans are easy to get but comparing the wearing of the machinery and its deteriorating valuation with the actual profit that can be achieved.

8.Personal Loans
A business loan is usually with a higher percentage of interest rates compared to personal loans. If the amount required is up to ten Lakhs or something, a personal loan may act as a better option than a business loan. Again, an unsecured type of loans with maximum seven years of tenure.

9.Nonprofit Business Loans
There are may co-operative organizations or community services which help the upcoming businesses. They offer negligible interest rates and sometimes no interest rates at all to the borrower. If possible, one should try getting these type of loans as in a longer run, these will be beneficial.

10.Microloans
Small loans for small-scale projects. Here, one can get loans as low as five lakhs. In India, mostly the grah udhyogs opt for these types of loans.

11.Short-Term Loans
Where the borrower is sure of the project and needs an amount for the smaller tenure, he or she may opt for short-term loans. They are aided with lesser interest rates compared to normal loans. The tenure can be as short as six months.

Business comes with a great financial responsibility with a future vision of prosperity to oneself and people working with. One should make sure which option suits the best to them.

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