July 20, 2024
Types Of Business Loan

Business loan is nothing but a loan provided for business purposes. But it also contains interest and it has to be repaid with the debt. There are many types of business loans. They are:

  • Bank Loans
  • Cash Flow Loan
  • Invoice Financing
  • Mezzanine financing
  • Micro Loans
  • Asset Based Financing
  • Business Cash Advances

Bank loans: A loan that is obtained from bank. For business loan the banks usually ask for the business plan and work sheets for loans sanctioning. Credit unions also referred as bank loans.

SBA loans: This is Small Business Administration loan in US. It does not give loans directly. But it provides guarantees for the loan sanctioning. SBA 7 is the main loan program that provides financing for fixed assets upto $50000.

Mezzanine finance : Mezzanine finance saves a company’s debt  by sanctioning it’s lender to claim ownership-part of the business if the interest is not paid again on time .This provides the business to get money without stressing on other assets,  but risks diluting the principals’ equity share in case of default.

Asset Based Finance: Asset Based Finance has become popular for small businesses due to its credit rating and record of success. This mainly focuses on the quality rather than the credit of the company. It borrows against one of the company’s assets with lender.

Mezzanine finance

Invoice Finance: Invoice financing is borrowing money against the amounts due from customers. Invoice finance helps in improving cash, payments and reinvestment for growth.

Micro Loans: Micro Loans are nothing but small loans. Loan amounts below $100000 are referred to as Micro Loans. These are less sanctioned by the banks.

Online Lenders: There are many online lenders came into rise to provide loan for the business ideas and implementations. It also involves unsecure customer loans. Some people use their own place for the loan offering. But some lenders offer loan by creating a market place for the loan sanctioning. The verification is fast with minimum documentation in this process.

Secured business loans are also called as personal loans that include some conditions and proper documentation and verification process as a collateral type. Large amount of loan money can be used here to purchase assets. But to get the loan, a specific asset has to be submitted as proof of document for the sanctioning of loan. An unsecured business loan is a loan that doesn’t have security. Business Loan is a smart idea to develop and succeeds in career with new implementing ideas.