In achieving something that you think is worth your time and effort, you have to be determined and motivated. This way, you shall have taken a step closer to success. One thing may not work without the other thus, it is best to make sure you take everything into perspective. In the same way, achieving something is also like owning a business. You have to make sure you have everything well-planned and that you are willing to do whatever it is for it to become successful. Although one of the things that is usually difficult to obtain in a business is the capital or the funds, it should not get in the way of making your business successful. This is where business loans are needed the most.
A business loan is a loan that is granted by a financial establishment, an individual, or an organization to a certain company or individual. It is expected that the company or individual must repay the loan on a certain date with a certain amount of interest. Business loans are used to start, expand and improve, or simply sustain a company or business in times of financial difficulty. There are various reasons for acquiring this type of loan. It can be used for:
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Upgrading and improving equipment and facilities
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Renovations and new constructions, and
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All the other necessary factors in developing the company or business.
Although attaining a business loan may be quite difficult, the three C’s must be followed to avoid having a hard time:
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Character
This refers to the kind of person that you are. The lender of the business loan will have to check if you have a criminal record, your responsibilities to the society and your family, and your home.
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Credit History
This refers to how organized your credit history is; whether you pay your debts on time, if you are in heavy debt or if you have missed out on some payments. Your financial background will depend on the lender’s approval.
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Collateral
This refers to any kind of property the borrower owns. The asset that he chooses to pledge, in exchange for the loan, can be confiscated from him by the lender if the borrower fails to repay the loan granted to him.
There are different kinds of business loans. You just have to know what kind of loan to choose and what best suits your business and financial status. The following common business loans are as follows:
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Secured Loans
In this loan, the lender grants the loan to the borrower given that the borrower pledges all his assets as collateral contrary to the loan. The pledged assets will then become a secured loan. The lender can acquire ownership of the collateral in case the borrower fails to pay. This way, the lender can recover the loaned money through selling the collateral.
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Unsecured Loans
Contradictory to secured loans, unsecured loans are not supported by collateral. Although obtaining an unsecured loan is complicated, it can be inexpensive. An unsecured loan is mainly an evaluation of the compensation capacity of the business.
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Start-up Loans
This kind of loan is very basic and is used for new business projects. Before applying for this loan, make sure to have a detailed plan about how you intend to use the loan. The more detailed and organized your plan is, the more chances of granting you the loan.
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Business Only Loans
The loan is only intended for businesses without the use of personal credit until the business is able to repay the amounts payable.
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Business Acquisition Loans
This kind of loan is for companies or businesses that want to take over or acquire another business. In this loan, the acquisitions are invested through debts which are called leveraged buyouts (LBO). Leveraged buyouts are acquisitions of another company consuming a certain amount of the money that has been loaned to meet the expense of acquisition.
Now that you know how to go about business loans, keep in mind that these loans are for the benefit of your business and that it will help you work your way to success. It may not be easy at first and you may experience ups and downs in maintaining or improving your business but it will pay off eventually. Just remember to be open to the different possibilities and opportunities that come your way and be patient all the way.