There are a lot of things to consider when applying for a business loan. You need to make the necessary preparations in order for you to choose the best options to serve your purpose. Assuming that you already have, you’ll need to consider some of these basic choices and initial decisions when it comes to business loans:
Start with considering whether you prefer a term loan or a credit line.
A term loan is a loan scheduled to be repaid on an installment basis for a certain period of time. It may be for a short-term loan (a year or less), or a long-term loan (a year to as much as 30 years or more).
Some of the major reasons for choosing a term loan;
- Your company needs to purchase additional equipment to meet the need of your growing demand
- An additional working capital
- A renovation of a new warehouse you just rented out for the expansion of your business
A credit line is a fixed amount of money offered by the financial institution and can be easily accessed by the business any time they need it. Think of it as money in the bank that you can easily take out and return anytime. And the Interest starts once the money has been taken out.
A credit line is considered as a short-term loan that can be ideally used for the following purposes:
- When the company is looking into purchasing a large supply to take advantage of a market opportunity
- Another is for the purpose of an investment opportunity that is only made available for a short period of time
After choosing either of the two options, you’ll also need to know whether or not you are qualified for a secured loan or an unsecured loan. With this, you’ll know what documents you’ll have to prepare.
A secured loan, it is that which requires collateral. This is normally the case for people with bad credit as financial institutions will need security for the loan they’ve provided for you.
The unsecured loan, on the other hand, does not require any collateral. However, it is much harder to be qualified for as you will need a really high credit score to be even considered for this loan. Apart from that, it normally has a higher interest rate and a shorter term.
As for choosing the right lender for you, the traditional lending institutions might not be the best option if you are looking into applying for a loan and expecting to have it released within 24 hours. Though it’s possible, for one, it will be a rigid process, especially if the amount is higher than most banks usually consider for a business loan.
Secondly, you will most likely land in a secured loan. If that’s the case, then you should have an asset such as a real estate property, equipment, or perhaps banknotes that the lending company would consider of value to them. In such a case they will consider it as collateral so that the lender will have something to claim for its losses in the event that the borrower defaults on their payments.
But then again, if you are looking for a 24-hour release of a loan, highly likely, your reason for applying for a loan is urgent. In this case, it would be advisable for you to consider private business loans. Private business loans are loans issued by a non-banking lender. It could come from family members, friends, venture capitalists, angel investors or private corporations who pooled in their money from private investors for the purpose of funding mortgages. If you are looking for something fast and convenient, then this may be the right direction for you.
Over the years, these alternative lending institutions have grown quite immensely through advancements in technology in the way they evaluate businesses. That makes for a faster release of the loan and more convenient for borrowers. With this, it allows them to be more flexible and are a lot less rigid when it comes to the requirements needed as compared to traditional lenders, such as banks.