Any kind of activity that one would like to make in a business requires some cash. Financial assistance in form of loans can now be accessed when a business needs some more money to sustain their day to day activities or when the business can use the money to take advantage of a very profitable niche in the line of the business operation. A loan is a facility where one is given a specified amount of money and they are required to repay it after a certain duration of time at an interest. To be able to qualify for the loans, the business has to meet certain conditions and they also need to explain the reasons for taking the facility.
The secured business loan is the most common loan which requires one to give substantial assets that would serve as security against the loan amount and such assets can be used to regain the money in case of defaulting. The other type of loan, the unsecured loan doesn’t not require security although they come with higher interest rates to cater for the risk involved. Bank overdrafts, like the name suggests, allows the business to overdraft their account, meaning that they have the ability to withdraw more money than is in their accounts although this means that their interest rates are very high.
Another type of loan that business can utilize is one where the business gets the purchases they require for their business. This business loan qualifies to be a loan because the purchases are sold a higher price to be repaid later, hopefully after they have sold them. Business can access the debt their debtors owe them by liaising with factors who agree to avail an amount lesser than the amount of debt owed immediately and then collecting the full of the debt from these accounts receivables. The factors get their cut by discounting the amount owing to the business by a certain percentage and then waiting for the credit period to expire before they can access the whole amount from the debtors.
All loan facilities such as United Business Funding will require the business to be legally registered and then has a previous good credit rating showing that they were able to honor credit extended to them in the past. The business also has to explain the reasons for them taking the loan for the persons extending the loan to determine if they can stand that level of risk and it the business stands a chance at recouping the loan amount. Depending on the risk involved, the extending entity determines the interest rates to attach to the loan. Financial authorities have been put into place to ensure the business and loan facilities are not exploiting each other by regulating the loan terms,to as well as helping the startups access the loans because most do not have a previous credit rating or assets to give more about security.
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