Generally, loans are described as money borrowed that will be repaid with interest.
The mostly sourced avenue for taking loans is the bank due to the variety of ways they use to fund businesses.
Hey everyone my name is Timileyin and in this post i will be showing you different ways banks help businesses through loans.
The first one on our list is the
This type of loan is mostly useful for small businesses and it’s also not a long term loan.
This kind of loan ensures that cash available in your business checking account is extended to the upper limit of the loan contract.
What this means is that you pay interest on the original amount ahead of the time it is until it is paid back.
Since they are short term loans, they cannot be used for the purchasing of equipments or real estate, instead they can be used for purchasing inventories among other things.
The second one on our list is the
This type of loan requires that you pay back with equal monthly payments and this is suitable for all kinds of businesses.
This kind of loan operates in this manner, when you receive a full amount of the loan after the agreement has been signed, the interest is calculated from that day to the final day of the loan.
There will be no penalty and adjustment of interest provided the loan is paid up before the end of the loan period.
The third one on our list is the
These loans necessitates the need for only the interest to be paid off during the life of the loan wirh a final “balloon ” payment which expires on the last day.
Balloon loans are mostly used when a business has to kept on hold for a particular period of time before receiving its payments from its clients.
The fourth one on our list is the
This type of loan is mostly used by building contractors when building new facilities, when the building is completed, a mortgage on the building will then be used to pay back the loan collected.
The fifth one on our list is the
SECURED AND UNSECURED LOAN
You may be wondering if it’s possible for loans to be secured or not, well loans can be made to be secure and it can also be free from security.
A loan is secured when a collateral is attached to the agreement and an unsecured loan obviously will mean the opposite i.e a loan with no collateral.
One major reason why people use unsecured loan is that they feel that loan is of low risk to them but a secured loan obviously will mean a lot to the lender and one thing about secured loans is that they have low interest rates when compared to unsecured loans.
The collateral used in secured loans is a function of the type of loan and purpose for which the loan was collected.
The small business administration (SBA) doesn’t actually loan money but what they do is that they provide guarantees to entrepreneurs or business owners telling the bank that they will pay back a certain share of your loan in the event of you not being able to pay it.
To qualify for being eligible to SBA loans ,you have to have the capacity to repay the loan from cash flow and not only that, the SBA also looks into your personal credit history, industry experience among several other things .
If you own at least 20 percent ownership in the business, SBA will suggest that you personally guarantee the loan.
Here are a few loan programes offered by SBA to help small businesses.
1. The SBA Express Program
2. CapLine Loans
3. The Microloan Program
1. THE SBA EXPRESS PROGRAM
This kind of program offers loans of up to $150000. Also, SBA express gets you results more quickly because since the SBA lenders are qualified, they can use their own documentation and procedures to attach an SBA guarantee to a loan provided it is approved without having to wait for SBA approval.
2. CAPLINE LOANS
These are loans that give starting funds to changing and unchanging lines of credit. Capline loans are guaranteed payable by SBA of up to $750000 or up to 75% of the total loan cost.
Capline loans covers businesses that are seasonal, businesses that need large funds to complete a large contract and businesses that can’t meet the requirements for other financing.
3. THE MICROLOAN PROGRAM
From the name implies “micro” , it is obvious that the loans given out here will be small when compared to the other types listed above.
This program assist entrepreneurs obtain very small loans from as low as $100 to as much as $25000. The loan is used for several things ranging from machinery, to equipment , to inventory, to furniture and so on.
Microloan are given out through non profit channels using SBA funds. The is also a short term loan.