Business loans come in many forms. There is a specified type of business loan that suits your business, your budget and your financial capacity as a small business or as a growing organization. Choosing the right type of business loan is essential. Such decisions help you avoid paying too much for a loan or too long. A good business loan is suitably personalized in terms of interest rates and payment terms to your business.
Different Types of Business Loans
a bank overdraft is a business loan feature that allows you to transact an amount above your approved overdraft limit without extra charges like an account overdrawn fee.
Such banking feature may require you to pay for a monthly service fee depending on the type of the overdraft used. The interest will also be applied to the amount overdrawn. Additional charges are applied if the fees and charges are not paid on time.
If a business is having a problem in maintaining a smooth cash flow, this type of business loan might be ideal.
Secured bank loan
If you would want access to a higher amount to finance your business, it would be ideal to get a secured business loan from a bank. However, it would be ideal to apply for a secured business loan if our business is already secured and successful. Such type of loans requires a collateral, such as assets to be able to secure a loan from the bank. If you are not capable of repaying a loan for a long period of time, this type of business loan is not for you.
Unsecured bank loan
Small and medium businesses can secure business financing through an unsecured bank loan. Such type does not require any collateral and is limited to a maximum of 12-months in terms of repayment terms. Repayment can be done daily or monthly. If you require a small amount to cover the expenses for your business, an unsecured business loan would be ideal for you.
Business Credit Card
A business credit card works like a regular credit card except for the fact that is used for business purchases and is under a business account. It has higher credit limits compared to personal credit cards.
Bank guarantees are a form of security that a business can offer to its clients or suppliers. Under a bank guarantee, the bank shall provide payment to the recipient with the amount guaranteed on the written demand.
Business can meet payment obligations to their suppliers while keeping a cash deposit under the company name with the bank.
Business term loan
Business term loans are fixed-rate loans that can be repaid in a year in minimum or up to 5 years maximum. Loan amounts start from $10,000 as the minimum. If a business is looking into increasing its capital or acquiring huge assets for a business, a business term loan would be an ideal option for them. Such types of loan can be amortised, depending on your choice.
Commercial bill of exchange
A bill of exchange is a written raft wherein a seller requires a buyer to pay on demand or through a fixed future time a determined amount of money specified by a person to the one who purchased goods or services.
Lease financing is a form of rental agreement. This can be mostly related to car lease finances. A financier basically purchases a car and charges a monthly repayment scheme to the end user. The repayment is within a term period. At the end of the term period, the end user may pay a negotiated amount with the financier to be able to claim full ownership of the vehicle. The financier may also opt to retain ownership of the vehicle. A negotiation is usually agreed upon between the financier and the end user at the end of the payment term.
Asset finance loans is a form of a secured loan. It is secured by the asset purchased. For ga rowing business who would want to invest in equipment of improve cash flow, asset financing might be a better option.
At the start, for some, at the end, of the loan term, the lendee may choose to finance to own or finance to return the acquired asset.
Personal loans are short-term loans that can be used in many forms. It can be used for emergencies, school fees, for a car deposit, additional wedding funds, medical expenses or any other unexpected expense that the lendee may see fit.
Personal loans are usually for clients with good credit standing. A regular source of income, backed with employment confirmation, pay slips and other financial documents are required to apply and qualify for a personal loan.
Trade finance are usually equipped for exportation and importation trade transactions. Loans used for this type of business loan can be used to purchase goods or services. It can also be used to pay for goods and services purchased abroad.