Business Loans for Major Purchases and Expansion

by John Stevenson on July 11, 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.

Types of Financing

There are different financing options, including angel investors, small business loans, equipment leasing and financing, and others. Banks also offer professional, franchise start-up, and commercial real estate loans. 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. Unsecured loans are offered to regular and creditworthy customers because collateral is not required. In addition to these types, there are other forms of financing such as secured working capital, long-term, government micro-loan programs, and business acquisition loans. Traditional lenders such as brick-and-mortar banks usually offer debt financing. Long-term loans are also offered to finance the purchase of real estate, rental estate, equipment, industrial plants, and facilities. Lenders offer financing for purchases, improvements, and business expansions. Micro-loans are another option for small businesses, and they are usually offered by non-for-profit organizations. The money can be used for the purchase of machinery and equipment, furniture, supplies, and so on. Some financial institutions also offer professional loans to doctors, CPAs, lawyers, and other professionals. 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. Business owners must submit documents such as financial statements, bank statements, business plans, resumes, and income tax returns. 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. Banks are also interested in your business profile – length of time in business, history, number of employees, sales volume, etc. In addition, you must submit a loan request that describes the type of loan, amount, purpose, preferred payment options, and so on. The loan request letter usually includes two sections: executive summary and a financial objectives section. You may want to explain whether you will use the funds for business expansion, product development, or your current near term expenses.

Other Types of Loans and Alternatives

Business owners are also offered credit cards, lines of credit, equipment financing, equipment sale-lease backs, and other financing solutions. There are different options to consider, including residential equity lines, construction financing, as well as business acquisition loans. Some companies also use business only and hard money equity loans, but the latter are more difficult to obtain.

Comments on this entry are closed.

Previous post:

Next post: