The 4 common types of business loans available
Posted: Aug 19, 2020
Business loans are the most powerful financial products available to aspiring and established entrepreneurs. They may be obtained at the onset of building a business or when seeking capital during different phases of growth. Working capital can play a major role in consolidating, growing, and reviving a business over time. There are different situations in which a business loan can be used to fulfill theworking capital with the aid of a loan.
If you are seeking a business loan, it serves to know the types of loans that you can avail. Here are some popular types of business loans that you can apply for:
Loan against securities – As the name suggests, Loan against securities is a kind of loan that you can seek by keeping security or collateral. The collateral can include anything that is owned by the business proprietor or partners. Typically, banks accept security in the form of bonds, mutual funds, insurance policies, fixed maturity investment plans, shares, and more. Whatever type of security that you wish to obtain funds against, the same must be approved by the financial institution granting the loan.
Demand loan – A demand loan is one that will have to be repaid at any moment as specified by the financial institutions. The repayment schedule can be determined by the bank at any time and it could even be at a short notice. The actions taken as part of this loan type is majorly driven by the terms and conditions laid out in the loan agreement. A demand loan may or may not be backed by collateral.Demand loans are usually taken when the funds are needed for a short term as the tenure usually ranges up to 12 months.
Term loan – A term loan is a good opportunity to fulfill high-cost business needs. This could include machinery, heavy equipment, building, capital vehicles, commercial land, and more. Depending on the types of loan you choose, a term loan can either have a floating or fixed rate of interest. A term loan may also be secured or unsecured. Typically, this type of loan comes with a minimum loan tenure of 3 years.The maximum tenure can extend up to 15 years.
Cash credits – Another common type of bank loan for business, cash credits are granted in the form of overdrafts. The security held by the bank for this lending includes stock that is held by the business in the form of trade or raw materials. The loan can be very useful for fulfilling working capital requirements.
Who could be qualified for a Business Loan?
It is safe to say that you are considering benefiting a business credit at any point in the near future? Peruse through our business advance qualification models referenced underneath, to ensure your business advance is affirmed at the absolute initially go:
The candidate must be good to go for most recent 3 years with a base turnover of Rs.40 Lakhs
The business more likely than not produced benefit for at least 1 year
The candidate ought to be a Sole Proprietor/Partnership firm/Private Ltd Co. /Trust/LLP associated with the matter of Manufacturing, Trading or Services
The fundamental candidate ought to be least of 25 years old and ought to be no more established than 65 years at the hour of advance development.
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