Things to Know About Business Loans


Having a loan is very common to business owners. That is because of the fact that their business financial needs change over time. There may come a point wherein they need to expand their business or they need to open up a branch. With the help of business loans, they are able to preserve or maintain their personal finance accounts or funds. Through that, they will not worry about losing everything that they have in case they go bankrupt or their new business venture fails.

Photo of Things to Know About Business Loans 1/1 by Lisa Williams

Another good thing about business loans is that owners have different types of options. What is better is that these options can easily be narrowed down with the help of business loan calculators. Through these tools, they will be able to know the expected amount that they need to pay weekly, monthly, bi-annually, or annually. A type of business loan that is very useful and convenient is the so-called equipment loan. As the name implies, it is a type of loan that is availed in order to pay for or buy machines for the business. Thus, owners no longer have to use their credit cards and undergo the long and difficult credit card processing system.

With equipment loans, business owners can borrow a maximum amount of five million dollars. The interest rate usually ranges from two to twenty% of the total amount borrowed. The loan is usually paid within a minimum of 12 months and a maximum of 72 months. Another type of loan for business owners is the start up business loan. The amount borrowed is usually intended for putting a new small business or for putting up a new branch of the small business. Start-up business loans that have been availed in companies connected with Small Business Administration (SBA) has an interest rate ranging from six to nine %. Those availed through credit cards or banks have 12% interest rates.

When it comes to payment terms, such will depend on the company or bank that has given the loan. They may last for 12, 24, or 72 months. At most, they may even reach a maximum of five years. Factors that affect the payment terms usually include the financial status of the business, the amount borrowed, and the collateral. Another type of business loan that will depend on the yearly net operating income of the business is the so-called commercial mortgage loan. The amount that can be borrowed in this type will be from $150,000 to $5M.

With this type of loan, the borrower will be required to have real estate collateral. The value of such will be the one that will determine the amount that the borrower is qualified to loan. In addition, the three % interest rate will be based on the prime rate, which usually fluctuates on a monthly or yearly basis. With such in regard, it is important that you calculate interest on your commercial loan. That is because of the fact that these types of calculators are also updated whenever changes happen or occur.

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