Some Small Business Loans Explained
It can sometimes be a little bit daunting if you are either thinking of starting a new business or possibly expanding your present business; you realize that you need some sort of a small business loan but until you have a good idea of what the various loans are called and what they can be used for
, how do you know who to approach for that loan and what to ask for? Here are some of the terms explained:A business expansion loan
If a business is doing well and the owner is feeling restricted because the premises are too small or they need to take on more employees in order to get a bigger share of the business available, then the owner might well consider taking out a business expansion loan. This loan will probably be easier to get than a business start-up loan, providing the business is already profitable, as the lending company will have the company accounts to check over and give them confidence that the business owner will be able to repay the loan.
A bridging loan
A bridging loan is probably the least stable of all the loans that a small business owner might consider. This is where the business owner needs to sell something in order to release some finance and has perhaps a property for sale. Usually for a high APR %, the business owner will be able to arrange a bridging loan on a property but many things can go wrong in the house selling market and there is a distinct risk that the property will not sell and then the business owner would have the burden of the bridging loan on his shoulders, as well as the problems of starting up and running a business.
Bad credit business financing
If you have gotten stuck in a low-paying job and you've ended up racking up your credit card, you may find that you are being sucked into a bad credit black hole, where your committed outgoings exceed your income and the increased credit card charges are beginning to swamp you. Your credit rating will start to deteriorate and it will become more and more difficult to get credit.
If you are prepared to do all the work that is necessary to start a new business and you have a good business in mind, it is possible that you could get some sort of business financing; this is known as bad credit business financing and it will probably come with some helpful conditions which allow lesser initial payments while you get back on your feet but then the payments will increase significantly after perhaps 6 months or a year.
Business line of credit
Unlike most loans which make the agreed finance available straight away, a business line of credit is an agreed amount of credit that the borrower can draw on at any time up to the agreed limit; interest is only charged on money that has actually been drawn from the loan account, so this tends to be very convenient for a small business starting out and you are not having to pay interest on money that is just sitting in your account waiting for you to use it. The interest rate is less than the interest rate charged by credit cards but higher than a normal business loan; in addition there will be a fee involved in setting up the line of credit.
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