Loans from Banks and Non-bank Lenders

by John Stevenson on March 20, 2014

Business owners can choose from different types of loans, including government and private. Some small business loans require collateral while others are unsecured.

The main types of financing include loans and revolving credit such as lines of credit. Government backed loans are also offered through micro lenders, community development organizations, and others. The funds can be used for different purposes, including the purchase of commercial vehicles, machinery and equipment, renovations to buildings and premises, land, and others . Start-ups, new, and small businesses qualify. Businesses benefit from the fact that these loans are guaranteed by the government. Financial institutions require that borrowers offer collateral, a breakdown of their capital, and cash flow projections. Loans are also offered to businesses that seek to finance improvements and leaseholds. The goal is to help companies expand and reach new markets and new businesses to get started. Companies use business loans for expansion, operation, and acquisition. They can use the funds to finance leasehold improvements, production facilities and equipment, software and communication equipment, and buildings. Governments also offer microloan programs to non-for-profits and small businesses. Businesses also use microloans to purchase supplies and inventory and for working capital. The criteria of intermediary lenders and the presence of collateral determine the loan terms. Individual retirement accounts, mutual funds, jewelry, and perishable inventory cannot be used.


Loans from Banks and Non-bank Lenders

Businesses can apply with non-bank entities, peer to peer lenders, and brick-and-mortar banks. Other options for borrowers include intermediary bank term and short-term loans. Borrowers are asked to present a business plan, forecasted financial statements, and other documents. Your credit score is an important factor in that an excellent score shows to banks that you are a trustworthy borrower. Applicants with an excellent credit score are offered attractive deals and competitive interest rates. Borrowers with fair credit are asked to pledge some asset. This can be real estate, land, equipment, commercial vehicles, and others. While applicants for government loans may have to fulfill planning and training requirements, private lenders are more flexible. Financial institutions offer business credit cards and commercial loans. Personal financing in the form of home equity loans is also used. The type of loan to apply for depends on your project, location, and other factors. Businesses can choose from disaster loans, small business loans, and other types. Local, state, and federal governments also offer grants.

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