Operating a business takes money and most people has heard the expression you have to spend some money to make money, but where do you get the money if you 政府中小企資助 aren’t independently wealthy, or established? A business loan is the answer to most business needs. Regardless of the size a business is, just about every business owner at some point has to think about a loan. A business loan can help a business get started, expand once it’s coming and growing, or get a business through the tough spots that happen occasionally. Deciding on a business loan is a key step, but which loan is right for you and how do you decide between the many different assorted types?
Skip the Loan and Use Plastic
Some business owners choose slight variation on a business loan and go for credit cards to back their startup, expand on an existing business, or help their business via the tough stretch. The positive reason for using credit to invest in your business is that it is often easier to get, or already existing in a personal credit card, but there are a couple of serious disadvantage to using this type of business financing. The first negative is that unless your existing personal line of credit is unlimited there might not be enough funding on your credit cards. The second negative to using personal credit cards is that your personal and business cash flow is not separate. This can create mayhem if you need to use your credit for important personal needs and it can have a similar affect business funds if you suddenly have to tap into your credit for personal reasons. Lastly, the interest rate on credit cards is often more achieable than any of the assorted types of business loans.
A Bridge Between Credit cards and Business loans: Lines of credit
A loan operates in the same as a charge card. You apply for a business loan loan and based on your qualifications you are approved for up to a certain amount. You are not charged on the loan until you actually use the money and are only charged for the amount you actually use. Another similarity between lines of credit and credit cards is the loan is often an unsecured loan meaning no assets are used to ensure the loan such as homes, cars, the business itself. However, unlike a charge card business lines of credit have interest rates much closer to an authentic loan level.
On the downside those interest rates are usually variable like a personal credit card and get higher or down over the period of the loan. Another downside to lines of credit is that like a charge card your instalments should be only a little more than the associated with interest each month.
This may seem like a vital at the start because the monthly payments are so low. The catch there is that lines of credit to not extend forever. There is almost always a hard and fast number of years for the loan are be around. At the end of that time (and sometimes within the past two years of the payback) money is not longer available. After that period, the payments are higher to make sure the money is utterly refunded by the end of the loan.
If you have the discipline to make yourself pay more than the minimum every month in order to lower the loan, this can be a good loan to get. It allows for occasions when money is tight. You can pay the minimum at those times without endangering a default on your loan.
Traditional Types of Business loans
Even if you do not have an extensive amount of credit, and if you don’t think a loan is right for you, all is not lost. There are many more traditional varieties business loans to choose from:
— Working Capital Loans: These loans are what most people think of when they consider getting a business loan. They come in two types, secured and unsecured. Unsecured versions of working capital loans are usually only available to those business owners with stellar credit, a sound business plan, and an established business with a proven track record. Startups are usually too risky to be granted unsecured working capital business loans. Secured working capital loans are a little easier to get although the amount of collateral needed to obtain these loans is often based on the credit of the borrower. These loans make it easy for all types of business to conduct their affairs on a day-to-day basis with available cash. Loans are ordinarily secured with homes, and other valuable assets.
— Accounts Receivable Loans: These are short term types of financing available when you hit a difficult spot and now you have money arriving in at a particular time. Your company’s records of accounts receivable act as a security for such loans. On the downside the interest rates of these short term loans are usually higher than a long term standard loan, and you can wind up in a bad circle of using your assets (receivables) before you get them and then not have money left before your next income period. This type of loan should only be considered in a select few types of cases of emergency such as the need to meet payroll, purchase inventory at a value, or other necessities.
— Business Only Loans: This type of loan is tried for using the capital and assets of the business alone and not any personal credit or credit history of the owner. It is only available to a business with a solid record of reliable income, the long-term prospect of fluid operation, and strong business credit scores.
Other Function Specific Loans
Assistance during business operation when you need a loan for a specific type of purchase such as to buy new or replace old equipment, the purchase of real estate for the business, or other dedicated needs there are loans designed to be separately available for just those times.
Getting the Loan
The best way to ensure success in getting your business loan is to be prepared. Enter your bank with a well-formulated business plan on hand and make sure your credit is right. If you know of any spots on your credit history, anticipate to explain them. Lenders are human too, and know that there are situations that are expected but if you can prove your trouble is in the past and you are on more solid ground it will help a lot in getting the loan you desire. Letters of explanation to go along with your loan package help if there were situations such as illness, or caring for a sick loved one that caused problems in the past.