A business loan is an unsecured loan specifically meant for business uses. Like all unsecured loans, it usually involves the production of collateral, that will then be repaid by the lender with additional interest, as the case may be. Businesses that have higher risk to the lender will most often require a business loan.
A business that is in its infancy may find it hard to obtain a business loan. There are many requirements one has to fulfill before he/she can get a business loan. One has to show that the business is stable and not too risky to the lender. In addition, the amount of money the lender wants to lend is usually different than that required by a company.
Some business owners may opt to use their own resources to help them secure a business loan. These resources include the personal assets of the business owner and his/her own money.
A secured business loan can be secured by the value of property owned by the business. It can also be secured by the borrower's own assets such as his/her home or car, if the borrower has one. The borrower has to provide evidence of ownership of the asset and that it is being used in a business capacity.
A business that is being funded by equity, for example a private investment from a bank or other lender, must also show that it is financially viable in order for the investor to grant a business loan. The money lender may request that the business present financial projections as well as an assessment of its cash flow. If the business is in a highly volatile industry, it may have to submit an application for a business credit card.
The business owner is required to give an assurance that the business has sufficient and reliable sources of funding to keep it in operation for at least a year. The business owner also has to prove that the use of the capital provided is not going to harm the business. In addition, the owner has to prove that the business is viable for at least a year. And the lender has to prove that there is no possibility that the business can't pay the loan.
The business owner has to prove that the business is making an income. And he/she must show that the profits are at least two percent above the cost of doing business. If the business is at risk of failing because of poor economic conditions, a business plan will also be required by the lender.
Many business owners are apprehensive about applying for a business loan. But if they follow the steps outlined here, applying for a business loan can be a pleasant experience. You can get more enlightened on this topic by reading here: https://en.wikipedia.org/wiki/Business_loan.
