Business Loan Uses
By
John Williams
Ever
heard the saying, “It takes Money to make Money”? The principle of
borrowing money from banks and other credit agencies to make money has
been a relatively basic assumption since early trade days. Existing
business owners may want to expand their business, buy more inventory,
or even hire more employees. New business owners need start-up capital
to get all the balls rolling. Many times businesses take out loans,
just because they can. It helps build good credit standing. When
discussing the purposes of a business loan, one must look at the
various types of loans available. Many times, the reasons your business
may need a loan don’t fall under reasons the bank feels you need a
loan. Here are a few examples of types of loans available and the
functions these loans are used for:
• Short-term loans are usually used for short-term working capital
for a business temporarily in need of cash. These loans may be based
upon seasonal fluctuations, and other short-term problems that a
business may encounter. Usually, these loans are paid within 1 year.
• Intermediate loans are often used for businesses that are
starting up. These loans may be used to build inventory, buy equipment,
or increase working capital. Working capital is money needed for
business purposes such as paying employees, maintaining good over-head,
and other business needs.
• Long-term loans can be given to business owners that are well
established and wish to increase their fixed assets, for related
business acquisitions, and for expansion. Long-term loans may be given
to start-up businesses, as well. Usually for purchases of land or
buildings, construction efforts, and long-term working capital, these
loans have terms that run 3-5 years.
• Government small business loans are available through financial
institutions, as well. The government guarantees these loans if certain
criteria are met regarding the business and the business owner. These
types of loans can be used for various reasons: the purchase of land or
buildings, new construction or expansion, to acquire equipment,
machinery, furniture, fixtures, supplies and materials, and to
refinance existing business debts that have higher rates and
unreasonable terms. These loans can be used for both short term and
long term working capital as well.
Most commercial banks, credit unions, and even investors expect
business owners to have a well-thought out plan regarding their
business. These business plans should incorporate the usage of loans in
a very decisive manner.
About the author:
Check out the business loans blogger at http://businessloans.blogspot.comHe reviews business loans and interprets complicated financial data into simple to understand language.
Circulated by Article Emporium
|
Loan