Nowadays, with the fast-growing world, it is challenging to earn money only by doing jobs, and business seems to be the only way out. However, doing business is not an easy task; it comes with great responsibilities as well as problems. Every sort of business loans has its own distinct problems, but money can make a special way out from each of these.
If you have enough money, then you can start your business easily, but if you don’t have money, then you have to raise it by other means. There are many different ways that you can get money like fundraising, finding some investors or you can borrow it form any other person or company.
Getting money through some other means may seem to you an enormous task but it is not as difficult as you think of them to be. These have been made simple by the lenders out there in the market that are working for your benefit and are trying to help you out in your difficult times.
This article will provide you with some information about short term small business loans. You will be provided with the information regarding a few aspects of taking loans, details of the procedures of taking loans either by a company or a person, pros and cons of taking loans and much more.
Few important things that you have to keep in mind before taking loan form another party
At first, you have to decide why you want to take a loan also how much money you want.
If you want to purchase goods for your business that can be sold at a great margin that you can also return the loan as well as you can run your business smoothly.
After that, you have to decide how much money you want. Wants of a person are much higher than his / her needs, but the matter of fact is if you are taking a loan you have to be careful as loan comes with a lot of risks.
You should also keep in mind that you have to think about the time you will take to pay the loan back. Before taking loan you should also consider current financial state of your business either its running in a way that you can earn back the money you are investing in it as well as you can generate some revenue from this money.
You should also keep in mind if there are any outstanding bills or loans you have to pay before taking another loan. You must clear out all the bills and loans before-hand so that the chances of you getting the loan might increase up to much extent and you would not have to face any trouble regarding the borrowing of loans.
Importance of business loans
Business loans are a good way of keeping your business running in a smooth flow or the ins and outs of transactions. Short term business loans are considered mainly just because of the user/owner can cover up the deficiency of cash that occurs due to many reasons.
Business loans are important just because you can keep all your control over your business, unlike when you borrow money from a person, and you have to give some share of your business to the lender. By taking loans from the bank is convenient as compared to a single person, as the bank can give you much more loan than a single person.
If your luck is with you and your documents are complete, you will be able to receive a loan much faster. If you think that you can use your credit card instead of taking a loan, then let us tell you that credit cards have much more interest rates than that of bank or lender loans so this is a more convenient way for you.
Types of lenders
There are various types of lenders out there in the market that can provide you with the amount of money that you need for your business’s financial needs.
Small business administration
SBA financing program varies according to the needs of the borrower; it provides almost 30% relaxation for the person applying for a loan.
Following are some programs of Small business administration
Guaranteed loan programs
This particular program is made for the help of needy businesspersons that are in dire need of quick money that they can invest in their business and can have benefited from it. This type of loan is similar to that of standard bank loans, but you have to pay much less interest.
The interest rate is 2.20 per cent with the seven years plan and for the plan above seven years is 2.75 per cent.
You can use land in your possession, machinery, real estate, accounts receivables, saving accounts life insurance policies or you can also keep prize bonds as well as your warehouse having enough sellable stock as collateral assets for the guarantee.
Microloan program
The microloan program offers you money from somewhere two lac rupees to a few million rupees. This program is made to help a businessman in many ways. The main purpose of this loan scheme is to give benefits to the businessman suffering from many problems due to the working condition of the federal government and also the order passed by them all the problem that originates from these type of orders are solved by these microloan programs.
This type of program offers the businessman offers to purchase machinery, goods, capitals and other helpful liabilities in the business.
Preferred lenders
These types of loan lenders are the one who are well-known lenders to the people and have a record of most reliability towards the loan takers. This type of people are well known for their good behaviour at the time of giving money as well as taking back the loan.
Real Estate loans
This type of loan scheme provides loans to business against assets real state; the loan is signed under 40% of the total cost of the project and providing the amount of money that person requires.
Disaster Loans
These type of loans are the loans which are offered against the valuable items of a person who has faced a loss in business due to some natural disaster and now is in need of money. This scheme provides him with money that he can use it in his business and can restart his business from scratch.
Small business administration can ask you many of the things that you have to answer directly or sometimes in the written form some of them frequently asked questions are :
What is your professional background or business financial statement? They can even ask your current profit and loss statement in order to get the exact idea of how is your business running so that they can trust you.
They can ask for income tax returns; loan application forms history, business asset value, business overview and history also. All you have to do is just to be fair,
nice and clean.
Conventional bank loans and other lenders
Here comes another type of loan that is acquired from other conventional banks or lenders instead of Small business administration loans. It is a useful way to get some money because it offers all the same things that SBA offers but also offers much more.
Working capital operations loan
This type of loan is the short term solution of the deficiency of money in an instant, the benefit of this scheme is that a person can keep its business running while looking for some other source of income.
Equipment loan
This type of loan grants money to the people in business having trouble in generating enough money to buy equipment for their business. The equipment can be of any type starting from office stationery to the biggest electronics items. These type of loan is easy to obtain because unlike another type of loans, it does not require much of investigation; rather, it is the easiest way to get the money.
Professional practice loans
It is the type of loan that a person gets only and only if he is a doctor, a professor or a teacher or some other professional like accountants. The time period for the return of this type of loan is in between from one to three years. This type of loan is a great way of having money because it has fewer interest values than any other type of loans.
If a person who wants to start a business along with his job either he or she is an accountant or some professor in a college or university this type of loan is totally meant for them just because it’s easy to apply but also easy to return because they don’t have any hard terms that the loan taker cannot fulfil.
Franchise opening loan
These type of loans are totally meant for those who want to start up their own franchise of something, and they don’t have any money for that, but there is nothing to worry about that’s the place where this specific type of loan comes in handy. Banks and other lenders offer these sort of loans. Terms and conditions are easy, and the interest rate is also very low as much as 3.2 per cent annually.
Loans from personal references
If you have an idea of starting a business and you know that you can earn money from that particular business in such a way that you can have some profit from. If you think you can grow the business by hard work as well as with the additional cash, you can always find some person that can lend you some money then go for it.
This person can be your friend, your relative or any other guy who can give you a decent amount of money without giving you some trouble in the near future in this way there will be no worry interest because it will definitely be less than the bank or any other suitable program.
Pros of taking loans
- Boosts your businesses
First of all taking loans can boost your business up in such a way that you have instant cash that you can use it for purchasing some merchandise for your business, or you can pay some of your bills.
- Increased potential
Another benefit of taking a loan is that taking loans from a reliable source has much more potential than that of credit cards.
- Longer payback time
By taking loans, you have a more extended time of paying back as compared with some other source of credit.
- Much lesser Interests
Taking loans from other than credit cards have much fewer interest rates than that of credit cards.
Cons of taking loans
Taking out loans is sometimes a good thing for business, but it comes with a lot of problems which include
- Mental pressure
It creates tension in mind that we have to pay the loan at a time so our mind may get diverted from some other important factors that may lead to an effective business growth.
- Interests
The other thing is the interest which is also another huge tension, in a sense that it troubles you with the thoughts that you have to pay extra money while the actual loan money stays unpaid.
- Loss of collateral
If you cannot pay the taken loan on time then you have to face the consequences and the collateral that you have submitted can be gone for good.
Conclusion
Business is an excellent thing to do, it can support you throughout life, but it takes much more hard work than you can expect as well as a lot of money which you can arrange by any means. If you go for taking out loans no doubt it has good sides as well as bad parts that can change your financial status entirely so it’s only and only you that has to decide either it’s worth risk-taking or not.
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