A business loan can bail you out of any bad financial situation, be it as a newbie entrepreneur or as an established business owner. But do you find yourself in a fix about which loan to choose? Are you clueless about which would be the right fit for your needs? Given the diversity of business loans today, this is all too understandable.
A business loan can be availed from Tata Capital, as a business loan provides a company financial assistance to fund its need for capital or for meeting expenses. There are two kinds of loans for business:
Unsecured Business Loans– These types of loans can be taken by a business owner without offering any collateral for proprietorship, partnership, private limited and limited companies.
Secured Business Loans– These business loans are availed of in exchange of collateral, i.e. the owner has to pledge property or assets. If the loan is not re-paid due to any circumstance, the lender takes possession of the collateral.
Secured business loans can be taken on the basis of different kinds of assets. These include:
Business loans are secured with collateral like real estate, equipment, vehicles, invoices, inventories and blanket liens. In the event of the loan not being re-paid, these assets are liquidated.
2) Personal Guarantee
Giving a personal guarantee puts one’s own assets on the line, and not the business’s, for securing a loan. These guarantees either allow limited access (especially in the case of multiple owners) or unlimited access to personal assets.
Why Take a Secured Business Loan?
A secured business loan does well for the lender, quite apparently, but it can also prove to be a boon for borrowers. For instance, owners looking to start anew with a poor credit score will find it easier to get a secured loan. Some other advantages are low annual percentage rates, longer repayment periods and the possibility to forge a relationship with the lender – all of which can be utilitarian in near or long-term future.
Types of Secured Business Loans
1. Traditional Term Loans
Also known as middle-term loans, traditional term loans are the most common of secured business loans. Its conditions are straight-forward- you borrow a certain amount of money to be returned over a specified period of time with a set rate of interest. This is the most affordable loan product, making it very accessible.
2. SBA Loans
These kinds of secured loans are guaranteed in part by the Small Business Administration (SBA). They have multiple funding programmes like the 7(a), CDC/504 and Microloan Programmes, ideal for small and medium enterprises.
3. Business Lines of Credit
This kind of secured loan provides access to a pool of funds that you can draw from when needed. After you have repaid the amount taken, the pool is refilled to its original amount. This is why it is also called revolving credit.
4. Self-Securing Business Loans
These are secured loans that do not require additional collateral. For instance, equipment loans can be availed by the very equipment you are going to buy acting as collateral. The silver lining is that none of your business or personal assets is compromised.
The benefits of taking a secured business loan, from institutions like Tata Capital, are manifold. Not only can you borrow larger amounts of money with ease, but it is also possible to do so with a limited track record. Indeed, a secured loan is the key to giving your business the kick start it needs.