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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 dont 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.
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