Business Loans2019-04-15T18:39:05+00:00
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Business Loans
Starting or having a business is not an easy task. It requires a lot of resources and effort to make the business succeed. The most pressing aspect is the financing of the business. Constant cash inflow is sometimes a challenge for most businesses. When the going gets tough, some businesses resort to business loans to help them out of this situation.
As defined by Wikipedia, a business loan is a loan specifically taken and intended for business purposes.
Businesses cannot allow their collapse after there has been a lot of hard work to establish it. If a business loan is available, that option will be considered rather than for them to close down operations completely.
Business loans are not difficult to get. You should however understand why you need the loan in the first place. This is because the business loan should come in for good and not to leave the business worse off than before. There are different ways for a business to obtain capital when its needed.
What then is a business?
A business is the act of making a living by producing or selling goods and services to the public. A business is a profit oriented venture. Businesses can range from the everyday peddlers on the sidewalks, start-ups to huge multinational companies like General Electric, Nestle and the likes.
Businesses come in different forms and types, depending on the particular service that you are rendering to society. Every business has its place in making up the overall economy of a nation. The term business has in the past been used interchangeably with company. The two differ though because with businesses it sometimes refers to sole proprietorship and bearing risk alone. While with companies, they have some form of limited liability when it comes to the risk to be borne.
Businesses can offer services in the accounting industry, manufacturing, marketing, research and development, sales, human resources and the list is endless. Everyone with their speciality and the target market that they are to reach.

The existence of Small Business Administration (SBA) loans
In US the small business administration is an agency that was established in 1953 to promote economic growth by assisting small businesses. They provide counselling to help those who want to start or grow their businesses.
There are different tools provided on their website to help these businesses get to where they are supposed to be.
They also have localized offices throughout the country that offer one-on-one based services. They include writing of business plans and how to get loans when they need them.
Small Business Administration loans are given to small businesses which do not qualify for loans from financial institutions.
The various reasons why they may be rejected include the lack of business history, no collateral to secure loans. Inadequate credit history can also affect the search for business loans.
The SBA does not act as a direct lender but as an underwriter ( assuming the small businesses risk for a fee) on the banks behalf for the funds that will be given for the business. If the small business default on the loan, the SBA will be liable to pay the bank a percentage of the loan amount on behalf of the business.
Types of Business Loans
Conventional Business Loans
These are either secured or unsecured business loans given to businesses or companies. These loans are normally given to businesses that have strong banking relationships or have established good credit history, have some form of trade with other businesses and have good standing with credit reporting agencies like Dun& Bradstreet.
They give these short term loans which have lower interest rates and “balloon” the payment. That is to say that the amount to be paid for the loan is done in one huge sum at the end of the life of the loan.
You can also opt for loans for a longer terms that are amortized (with each payment going to the principal and interest).
Equipment leasing
A lease refers to a rental agreement where the owner of the equipment allows a user to use the equipment in exchange for payments. Equipment leasing brings in income to support the running of companies.
It was estimated that in US alone 80% of organizations leased out their equipment at some point to raise capital. This applied especially to small businesses due to the fact of limited capital. The lessor gains tax benefits from leasing their equipment.
Merchant Cash Advance
Merchant cash advance allows businesses who need cash but don’t qualify or want to use the process of going to bank to get funds.
Merchant cash advance is sometimes not considered entirely as a business loan but it is one of the well – known ways by which they can get capital if they are to continue existing. It involves selling credit card receipts at a discount.
The lender gives the money based on these receipts. The lender then schedules either to receive their money in batches, daily, or weekly until the loan is paid off. This type of financing for businesses does not have a term.
The repayment depends on the card transactions that come in.

Using account receivable invoices
Businesses that have to wait 30 days or more to be paid by another business or the government use this method to get funds when they need it. It not a loan per se but selling of invoices at a discount for immediate cash.
The funds for this type of financing for businesses is gotten after the necessary credit check has been done on both the company presenting the invoices and the agency that are yet to pay them.
The amount you can receive can range from 50% to 90% of the invoice depending on how much the total invoice costs.
Medical Factoring
Medical factoring exists for medical establishments. Clinics, hospitals and other health care professionals use this method when they are yet to receive funds for their services rendered.
In this case also , these medical establishment sell their invoices for cash now.
Medical companies receive their payments from third party groups like the insurance companies and the state.
They sell the invoices either on one time or an ongoing basis. Once the medical establishment shows interest in selling their invoice, there is an analyses the terms for which the invoices will be given.
This can be a bit lengthy, but businesses find it better than getting financing from a bank.
Commercial Real Estate Sale Leasebacks
This is similar to equipment leasebacks but instead of using owned equipment to get cash when they cannot borrow from the bank, they use commercia real estate to get funds.
These include manufacturing to large utility plants, commercial real estate, office buildings and the list goes on. This type of business loan frees up cash that has been locked up in real estate.
This happens because many businesses have challenges with finance no matter the industry that they are in.
Reals estate is therefore an asset that can be used to get access to finance when its needed.
Improving your chances of getting business loans
Are you running out of funds and in need of business loans. The first option is to look for a loan package. This is commendable but in order to get the best result, you should consider some of the following to improve the chances you have to get business loans.
• Apply with your business name rather than your personal name
It is better to use your companies name as against your personal name when looking for business loans.
The simple reason being that, it is a business loan and not a personal loan. Putting your name there makes it personal.
Banks are willing to give business loans but are not interested in giving it to the person. They are more interested in giving it to the business entity.
Sole proprietorship business may have a bit of difficulty in getting business loans because the owner and the business is seen as one entity.
Corporations have it easier because they have established laws that govern them, they have a tax ID number and a bank account.
Lenders will be more willing to accept to help out established businesses than if it were in the name of an individual.
Another case in point where you may not get business loans is because when you apply as a person in charge of a business it will be seen to be acting based on personal interests of the individual and not the business.
Loans that are given to businesses are able to successfully differentiate the business credit history from personal credit history.
Lenders do not tolerate business and personal expenses being mixed up. You can easily get a construction loan and end up using it for personal expenses on your home.
This can spell bad for tax and IRS. It can prevent the business from receiving future credit from lenders.
• Apply for more than one business loan from different institutions
As the saying goes, do not put all your eggs in one basket. The same applies to when searching for business loans. You should have all the options you want before you.
Loans are needed for expansion, hiring additional employees, acquiring more tools for work and production and to add on to the existing customers you are serving. With no access to business loans, these goals cannot be achieved and the desired progress of the company may not be realized.
Businesses should however not open up too many loan applications also as this will send a message of desperation to the lender.
• Apply for business loans which are unsecured
It sometimes is suggested that unsecured lines of credit are more safer than going in for a full-blown application.
This is because those loans may be readily available and with quicker approval than bank loans.
It is easier to get because of the fewer restrictions and can give you a good credit boost for the next time you need loans.
You can even have a business credit card advanced to you when you apply for unsecured loans.
It will mean you will still have to check the interest rate on using the card as well as ensuring that penalties for late payments are not incurred.
These have to be checked so that your credit is not messed up.

The different types of leadership for businesses
Businesses have different types of leadership and depending on the type of leadership you choose, it can have an implication when you want business loans
– Sole proprietorship
Sole proprietorships are known as sole traders. The business is owned by one person and may hire employees along the line.
There is unlimited liability ( being exposed to all the potential losses in the company). All the assets of the business belong to the proprietor cost the business incurs. Every infrastructure as well as property is also owned by the same. When it comes to business loans, sole proprietors may find it a bit difficult because there is no distinction between the business and the owner, that’s what makes it risky. Lenders may therefore be unwilling to give to them.
– Partnership
Partnerships are businesses owned by a maximum of 3 or more people.
These people are known as partners and they have unlimited liability for the losses that are incurred in the business.
Types of partnerships include limited partnerships, limited liability partnerships and general partnerships.
Depending on the type of partnerships and different factors, access to loans may either come easy or difficult
– Corporation
A corporation has limited liability and the business is seen as a separate legal entity from the owners. Corporations are either government-owned or privately owned. They can also be for profit or non- profit.
Corporations that are privately owned and stand for profit have shareholders who elect the board of directors of the company and hire staff.
In some cases, corporations can be privately held or publicly held with shares listed on an open stock exchange.
When corporations need business loans, they can easily apply. In case of losses, the shareholders or owners will not be liable to any cost beyond what they invested into the business.

– Cooperative
A cooperative is a group of people who come together to meet their common needs. They can either be for profit or non-profit. It’s different from corporations because its members are not known as shareholders.
They do not partake in the decision-making or the day to day running of the business. Examples of cooperatives include worker co-operatives, but can also be found in communities.
Cooperatives are a good source of business loans especially for its members who want to venture out. They provide loans with good and flexible terms and conditions for the businesses of its members.
– Franchise
Franchises are a type of business where entrepreneurs purchase rights to open and run a business that belongs to a larger usually multinational corporation. Franchising is very common in United States and serves as a major economic force. In a study its shown that 1 out of 12 businesses in the US are franchised and it employs over 8 million people in its sector.
– Limited liability company
As the name implies, this type of business has no distinction between the owners and business as an entity on its own. It does combine partnership and sole proprietorship in its dealings. In case of a fold-up of the company the owners will not be held responsible for any debt.
Business loans and business credit scores
Business credit score measures the financial strength of the company. What constitutes a company’s final business credit score is a payment history, industry information. There are sites where businesses can go on to check their credit scores which comes at a small monthly fee. This score is very important because it will determine whether you can have loans when you need them. As a business, you would by certain means need a business loan to support operations.
Business credit scores are generated by information from lenders, vendors, other self-reported and public data. All this information is needed to ensure that your credit score is accurate and reflects the credit history and credit utilization habits of the company.
The four major business credit score measure on a scale of 0 -300. When a business
attains a score of 100, it means that are less likely to be late in payments or be delinquent
when they go in for business loans.
There are four main business credit scores that are used when businesses want to go in for business loans and the lenders wants a credit check.

Credit Reporting Agency Name of score Scale Good score
1 Dun & Bradstreet Paydex Score 0-100 80+
2 Experian Credit Ranking Intelliscore 0-100 76+
3 Equifax Business Payment Index 0-100 90+

FICO SBSS Liquid credit Small Business Scoring Service 0-300 160+

The importance of business credit scores cannot be belaboured. It gives a good image to the company and increases the credit capacity.
Business credit scores show a businesses ability to pay its debts. A good business credit score will ensure that when there is a need for business loans, the company in question will get the financing that it needs under good terms.
Importantly, business credit scores are the backbone of th finance of the company. It allows you to cover the day-to-day running of the company, renting property where its needed, purchasing vehicles and the list goes on.
If the company does not have the internal funds to make all these changes, it will have to rely on an external business loans. Without a good credit score, the company will not have access to the business loan and this can stall their progress.
What businesses should look out for in applying for business loans
Business loans provide aid in terms of finance to businesses of different sizes (small, medium sizes, start-ups and larger businesses that are more established). You would also have to carefully plan to ensure that your application for business loans go through.
Firstly, you should have a business plan that is detailed and convincing to the lender. This will enable them know which type of loan is suitable for you and your business.
The business plan should include your business structure, the goals of the business, the past and future plans, profit and cash flow projections. The marketing strategy should also be considered.
At the end of the day it is important to state the purpose for which you want the loan. Also, your should have been able to assess the need for the business loan as against the needs of the company.
Investigating which of the loans being offered will suit you is also important. Before you finally settle on business loans, you should have known the amount you require, the loan term, the interest rate (fixed / variable) and how you will repay.
The loan fees and the security required for the loan should also be known to you beforehand.
All these factors add up to ensure that you take the right loan that fits for your business. Business loans can sometimes come in huge amounts and you wouldn’t want to default on them.

To conclude
In conclusion there are different types of business loans that company’s can choose from. Some include the commercial bill / bill of exchange. Which is a credit facility given to businesses to inject long/short term cash flow into the business.
You then have to pay back the value of the loan plus the interest accumulated over it at a specific maturity date.
There also exists overdrafts for capital that businesses can use after negotiating with the bank.
Depending on the arrangement, the bank can allow you to take more than what is in your trading account. It is usually required of you to pay the bank back within a month especially if you have negative balances.
As a business, you would definitely have different options of loans to choose from. Business loans can be a bane or a blessing depending on how prepared you are for it.
Every business has the plan to grow and expand and sometimes if there are no internally generated funds, it can be a challenge. That is why business loans exist – to make life easier for business and ensure that they are able to achieve their goals whether long term or short term.

Disclaimer: All loans offered through this website are subject to credit and underwriting approval. is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. Our lenders lend from $500-$5,000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.