If you’re someone who is looking for debt financing for commercial purposes, there are many options that you may choose from including commercial lenders, banks and also personal credit cards. While you approach your lender, you wouldn’t require pin-pointing the type of loan that you will need because it is the lender who will decide the loan which fits your present financial situation, after assessing your business finances. Although the lender will decide on the type of loan you are supposed to get, yet you should have a general idea on the various types of loans which your lender can offer you.
Here we compile a list of the general structure loans which you can get for funding your business so that you can get to know about your plethora of options. Check them out.
One of the most useful types of loans for the small business owners is the line of credit loan and this type of loan safeguards the business from all kinds of emergencies and stalled flow of cash. Usually, line-of-credit loans are given for inventory purchase and other payments of operating costs for working capital and other commercial needs. It is a short term loan which lends cash that is available in the checking account of your business.
These loans are repaid with equivalent monthly installments which cover both interest and principal. The lenders may offer you installment loans which may be written to meet all sorts of business needs. You get the full amount when you sign the contract; you calculate the interest from the date till the final date when you repay the loan. If you can pay off the loan before the final date, you will not be liable to pay any penalty.
·Unsecured loans and secured loans
Loans usually come in 2 forms, secured and unsecured. When your lender has a good relationship with you and he knows that you are able to repay the loan on time, he will offer you unsecured business finance without any hesitation. You will be liable to pay such loans back on time lest you accrue high interest rates which will turn into unsecured debt. Inability to pay off unsecured debt will lead to a poor effect on your credit report and will later on mar your efforts of getting a favorable loan in the near future.
·Letter of credit
This is typically used in international trade and this document allows the entrepreneurs to make sure payments are done to suppliers of other countries. The document substitutes the credit for the entrepreneurs till a set amount for a fixed period of time. Apart from letters of credit, there are even other forms of loans which you can grab for funding your business.
Therefore, when you’re eagerly looking forward to the different business funding options, you can definitely take into account the above mentioned options. Choose the ones that will suit your business needs and your requirements.