subject: Essentials For Start Up Business Loans [print this page] Start up business loan is an alternative which helps you in setting up a business. However, it is not just another way to finance your business as it also comes with different conditions like interest rate, tenure of a loan, credit rating, security etc. So, if you look for an option to get a business loan it is mandatory to consider various facts related to loans. That will make your decision practical and also help in smooth cash-flow.
Establish a new business venture is not a smooth road to walk on. The procedure tends to have many obstacles and one of the toughest hindrances is financing. But, a lot more depends on how as a start up business owner you handle and overcome this situation. This is the crucial time when one has to thoroughly study the finance market, various options of financing and at the same time pros and cons of every lending resource. This detailed study is significant because it can give the advantage of various loan offers and at later stage benefits like flexibility in the rate of interest, repayment etc.
A business owner usually does not prefer to invest his entire personal savings to the business. Yet, the option of arranging the full amount for external source is also not a feasible decision for him. Therefore, the mid-way is to utilize personal savings and obtain financing from the market as well. However, its ratio varies and it depends from business to business.
If we have to generalize the term business loans then it is normally categorized into two types:
Secured Loans: The kind of loan is clearly giving indication from its name only i.e. security. It means that if an owner opts for secured business loan then he has to pledge security for that amount. This security or collateral can be in a form of any real estate or other fixed assts. This is the most viable alternative for borrowers and lenders especially big banks and SBA Small Business Administration, U.S. (it does not lend money directly but works as a guarantor). The other benefit is in case of non-payment of the loan amount and a lender can take out the amount of loan from the collateral.
Unsecured Loans: We cannot deny the fact that whether it is a loan for start up business or any expansion your history to make payments plays a vital role. This credit history can be personal or business. People choose an option of unsecured loans either because of their bad credit rating or they do not have collateral to serve against loan. Although, there are number of choices available for unsecured loans but if we compare it with secured loan then unsecured loans offer a higher rate of interest and the tenure is also short for such loans.
Equipment Financing : It can be considered the third category of loans because it is used for business which is into purchasing of heavy equipment and machinery for its business operations. Such type of financing can be availed for any equipment upgrades and expansion of a business.
