Business is an act where you sell products and services to a client and get an amount from then in return. This is inclusive of the profit made from such a transaction. We all work in some or the other business deal and get a profit out of it. There can be possibilities where the profit range can be reduced due to many parameters. It may also get you into losses due to the same parameters. However, all this boil down to one thing i.e. money. Business works on the monetary liquidity it has, to perform all its activities. This liquidity is attained only when you have sufficient funds to work in a business. If there is less of funds and you need them to continue your business, then you avail of a business loan. This loan is made available through many sources such as banks, financial institutions and even lenders who work on a personal basis. Let us look at business loans in general and get into its veins.

What business loan can I get?

Business loan should be categorized, and you should look at it accordingly. There are many types of business loan and you should know which category you are eligible for.

Business Line of Credit - The lines of credit can be revolving and flexible so that you can enjoy the benefit and make maximum profits out of the loan proceeds.

Installment loans – Such loans are paid over a set number of payments that are scheduled when the loan is taken. Two installments are already paid over the loan and this helps to kick start the loan payment process. Timely payment of principle and interest is a must to continue such a loan as per the agreed timelines.

Balloon Loans – This loan is not fully amortized over the tenure and hence needs a huge balloon repayment at the end to repay the loan. Such loans have a lower interest rate and hence, are very popular.

Interim Loans – This type of loan is used to cover two transactions and close the loop. It is majorly used in a real estate transaction but is also popular in business as the deals may be incomplete in such as case.

Secured and Unsecured loans – These loans are different from each other in just one parameter i.e. collateral. If you have a collateral to back-up the loan, then it becomes a secured loan else it is unsecured. So, if your loan defaults, then your collateral is gone, but in an unsecured loan this does not happen. But in the latter the interest rate is quite high.

Letter of Credit – Such loans work on the letter of credit from the business. So, if you have a letter of credit from a bank which states that the payment due would be done on time and if this does not happen the bank is liable to pay the remaining amount serves as a great collateral in a business loan.

Short Term Loans – They are just like regular loans and the only difference is that the payment terms differ and work according to the lender needs. Since it is a short-term loan, it would need to be repaid in a span of 3 months to 18 months.

Equipment Financing – You can take an equipment loan from the lender to buy new tools for the business you run. This loan would have the equipment as the collateral as you would need the same for business purposes.

Invoice Financing – You can take a loan against the invoices that are outstanding in your business. The outstanding invoices can be used at 85% of the value so that you can get a good loan. In case if the invoices remain unpaid, you would be charged a factor fee which would be paid on a weekly basis.

Merchant Cash Advances – You can use all your merchant cash on daily basis to repay your loan proceeds. However, such a loan can be expensive for you as compared to the regular loans.

Credit Cards for Business – Such loans are not specifically a business loan as sit is over and above of the loans offered. If you get a loan of such sort, then it is a buffer as the payments needs to be done on timely basis else the interest added would be much higher than the principle amount and would also ruin your credit score.