Business  »  Small Business

Veteran Business Loans

By: Nisha S.   
Date Added : July 18, 2011 Views : 329

Business loans originated from new businesses wanting to succeed but not having enough financial stability to get started. The idea was to borrow a certain amount of money from a bank or financial institution, and pay the amount back. The amount would be paid back in installments over a period of time at a fixed interest rate or it would be paid back in a lump sum once the business achieved financial stability.
Business loans are still critical to the success of many businesses today, but a number of factors are looked at before determining the loan amount or if the business will be lent the money at all.
Like any loan, it's important that the business owner has a good credit score. The better the credit record, the lower the interest rate will be. The lender will also be more willing to provide the loan to a business owner with a respectable credit history.
The owner should also provide a business plan. This consists of a pamphlet outlining the process of getting started and includes a breakdown of potential costs and profit of the business. It shows the lender that the owner plans to achieve financial stability, in turn having the ability to pay back the loan.
With average credit and a mediocre business plan, it may be challenging to justify a business loan from a lender. Whether it's a private lender (personal relations or small lenders) or a commercial lender (larger financial institutions), they might ask for collateral which makes it a secure business loan. If the business defaults on the loan, the lender now gains ownership over the business, whether its inventory or other assets the business had.
Many lenders will also ask for a cosigner. The cosigner is then responsible for the loan as well as the signer.
Many businesses get financial support and/or are able to gain a business loan with the aid of the Small Business Administration. This institution prepares owners to open their business properly and also act as guarantors for the business owners, which means they take responsibility of the loan in case the owner defaults.
When taking out a business loan, providing a credible business plan can be critical in receiving the loan at a low interest rate. Although usury laws are in place (interest rates cannot legally be more than 10%), rates can still be fairly high depending on how well the owner is prepared when requesting the loan.
The owner should also be sure of the amount being loaned. It should not be too large since many businesses fail in the first year. However, it should be just enough to get started and running successfully.

Nisha is the author of this article on start up business loans. Find more information, about small business loans here

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