subject: BUSINESS LOANS: AN INTRODUCTION [print this page] BUSINESS LOANS: AN INTRODUCTION BUSINESS LOANS: AN INTRODUCTION
Business loan refers to the loans acquired for running or enhancing one's business. A business loan relates to the expansion and enhancement of a business. In other words we can say that the periodical redistribution of financial assets between the borrower and the lender. The process of acquiring business loans can be very tedious and it can also have some tricky conditions and limitations. To avoid this thing, people who wish to apply for a loan, must have a concrete business plan. As we all know running business is not a child's play. Small and big business loans both are available for everybody's needs.
There are common types of business loans available such as:
Secured loans- in secured loans, the borrower promised his assets as collateral against the loan and in return, the creditor grants the loan. The assets pledges by the person become a secured loan or secured debt. There are different types of secured loan are there such as
Mortgage loans- these loans are taken against the collateral which is the applicant's property, for instance, a house.
Non recourse loan- Non recourse loan is secured loan where the only security or claim the creditor has against the borrower is the collateral. It is known as a non-recourse loan because, here, the creditor has no option or provision against the borrower other than the collateral, in case of a failure in payment by the borrower. However, this happens only after 'foreclosure' by the borrower.
Foreclosure: foreclosure is an entirely legal procedure and this is where the mortgaged property is sold by the defaulting borrower to repay his debt to the creditor.
Unsecured Loans -These loans are the exact opposite of secured ones. It is a kind of a loan or debt, which is not supported by collateral. It is difficult to get an unsecured loan; however, it is inexpensive at the same time. Unsecured loans are basically an assessment of the repayment capabilities of the business.
Start-up Loans: Start up loans is very basic loans where the loan is applied for a new business venture. Before applying for a start-up loan, meticulous planning is advisable, before applying for a start-up loan. Here, the collateral and credit can have a deep impact.
Business Only Loans: These loans are availed only for business sans the usage of personal credit, till the time the specific business is capable of returning the amount payable.
Business Acquisition Loans: If a company wants to go through a takeover process, or wants a loan to acquire another business, there are loans available to complete that procedure. These are acquisitions which can be financed through debt. Such acquisitions are called 'leveraged buyouts'. This is very common, in many instances; the company has enough finances to carry out the takeover or the acquisition. Apart from these, there are professional loans; these loans are applied by a professional from a specific field. For example, business acquisition loans availed by doctors or lawyers and so on. The whole process of obtaining loans can be a very cumbersome and lengthy process.
