Additional Sources of Business Financing

by John_S on July 19, 2014

Business loans are offered to start-ups, entrepreneurs, corporations, and new and small businesses. Borrowers can choose from different financial solutions such as commercial and business term loans, cash flow finance, business loans and lines of credit, and others.

Long-term and Short-Term Loans

Applicants for business funding can choose from disaster and real estate loans, micro-loans, and others. In addition to loans under government programs, credit unions and big and small banks offer different financial solutions. Basically, financing falls in two main categories, secured and unsecured. Secured loans require some form of collateral such as real estate holdings, machinery and equipment, interest earning deposits, inventory, fixtures, and others. A good credit score is the main requirement for an unsecured loan. Other types of financing include peer to peer loans and equipment cash out refinance. Borrowers who opt for equipment and vehicle loans can use the funds to purchase machinery, trucks, vans, and so on. Long-term loans are also offered to finance the purchase of real estate, rental estate, equipment, industrial plants, and facilities. Other options are permanent, interim, and income-producing financing. Micro-loans are another option for small businesses, and they are usually offered by non-for-profit organizations. You can use the funds to purchase supplies and materials or as working capital. The interest rate usually varies between 8 and 13 percent. Short-term loans are another option if you need cash for purchases, inventory, or accounts payable. In addition, there are small business loans under different government programs that come with attractive interest rates.

Requirements and Criteria

Financial institutions run a credit check and require that all applicants submit supporting documentation. You may need to submit your profit and loss statements and current balance sheets. Most financial institutions require that borrowers present their personal and business financial statements, along with their cash flow projections and income statements. Your lender will look at your financial statements, including your tax returns, payments and outstanding balances, liabilities, and assets. If you are applying together with a cosigner, you need to present recent paystubs. Legal documents to submit include commercial leases, franchise agreements, and others. If you apply for a secured loan, you should bring a collateral document with you. You may want to explain whether you will use the funds for business expansion, product development, or your current near term expenses.

Alternative Arrangements

Secured and unsecured working capital loans are available, and the latter are offered to customers with a good credit profile. New business owners can choose from bank and buyer financing. Business acquisition loans help companies to purchase existing businesses.

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