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Business loan financeFinance is the lifeblood of the business. A business raises finance for variety of reasons such as commencing a business unit, improvement, expansion, amalgamation, renovation of premises etc. there are many ways of raising finance such as borrowing from banks, financial institutions, non-profit organizations etc. a private limited company raises finance by issuing shares and debentures.
When a business borrows loan from its creditors, it should repay them along with a rate of interest. Usually a small business concern borrows loan from the financial institutions as it cannot raise finance by issuing shares and debentures. Large business concerns should decide a suitable capital structure for borrowing loan. If the earnings or profits of the company are fluctuating, then the company cannot regularly pay the shareholders the sum of dividends. In such cases the company should ideally borrow finance through the means of loan.
As usual, before the company raises loan from any type of sources it must consider points like interest rate, accredation of the institution, term of loan and EMI and the terms and conditions adhering to the borrower. There are some internationally known banks from where a loan seeker can buy loan such as CitiBank, Bank of America, Barclays etc. SBA loan is guaranteed by the U.S. government and they have designed two types of loan programs such as 7 a loan program and 504 loan program. Both the programs provide loans to the small business units as well as the large proprietary concerns.
The 504 Loan program provides loan for the purpose of long-term financing and 7 a loan program provides loan for the shorter duration.
Conventional loan likewise are not guaranteed by the U.S. government. The rate of interest depends upon the type of project and the financial history of the borrower.
The franchise loans are provided for the seekers who wish to commence a franchise unit. The FHA and HUD provide loans for the extraordinary events that may take place in the lifecycle of the business such as amalgamation, merger, dissolution.
In America there are many banks that provide bank loans for any purposes.
The banks provide loans for buying equipment leasing, rural development banks etc. The SBA provides loans at concessional rates to the business aspirants who wish to commence business in rural areas. The maximum loan that can availed for buying equipment is dollar 50,000. The rural development loans that are provided are meant only for the purchase or construction of commercial properties and are not meant for residential purposes.
If your business is facing the cash shortage due to the factor of accounts receivable, then factoring is the most suggestible method. The process of factoring is simple and quicker.
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