Business loans are funds designed to assist with financing expenses of your company, available in different forms and with various interest rates and fees attached.

Receiving a business loan may not always be simple. To secure one, it’s necessary to present detailed financial projections and creditworthiness documentation, along with being clear about why the funds are needed. Being up front about why is essential when getting funding.

Definition

Business loans are an affordable form of debt financing that allow business owners to purchase equipment, bridge cash flow gaps or expand into new markets. They are commonly offered by banks or online lenders and repaid over an agreed upon loan term with interest charges applied monthly.

There are various types of business loans, such as term loans, SBA loans and lines of credit. Each one serves a specific need and has individual qualifications and requirements; some loans may even be secured or unsecured depending on their provider and borrower’s preferences and credit histories.

In order to secure a business loan, borrowers will typically need to present various financial documents like bank account statements, personal and business tax returns, balance sheets, business plans and financial projections as proof. Borrowers with poor credit will usually need some form of collateral or sign a personal guarantee agreement.

Types

There are various kinds of business loans, ranging from those secured against assets with personal guarantees required, to loans with no collateral requirements and depending on creditworthiness of borrowers. Common forms include term loans, SBA-backed loan programs, business lines of credit and business credit cards.

Terms and conditions for each type vary, but all are designed to assist businesses in starting up, growing, covering unexpected expenses or expanding operations. Some types of financing are tailored for small businesses while others only serve large corporations or government-backed entities.

NBC’s business experts specialize in helping companies develop financial strategies and projections, assess capital needs and identify sources of financing. We can also advise companies on the most appropriate way to approach lenders; should your loan application not meet our lending policy we will investigate the reasons for rejection and provide referrals to alternative resources.

Interest rates

While business loans may provide much-needed funding for an underperforming business, it’s essential to be mindful of their interest rates as these tend to be higher due to lenders taking on more risk by lending money to high-risk enterprises.

To qualify for a business loan, it’s necessary to satisfy several criteria. Lenders will consider your personal credit, business history and annual revenues when making their decision; some may require collateral as security against nonpayment.

Business loans can be found from many lenders, from traditional high-street banks to alternative online lenders. Many offer competitive interest rates and flexible repayment terms for their loans, making them perfect for working capital support or acquisition funding. Secured loans may be secured against physical assets but you could also choose an unsecured option without risking losing personal assets; additionally these loans may even be tax-deductible, further aiding your bottom line.

Repayment

Business loans come with variable repayment terms depending on their type, lender and amount borrowed. For example, invoice financing loans could have different arrangements depending on how quickly customers settle their outstanding debts.

Business loan terms can also be determined by collateral; assets that a lender can seize if the business defaults on payments such as real estate, equipment and financial accounts. Therefore it’s crucial that business owners understand these terms before taking out loans as this could impact how long it will take them to repay their debts.

Requirements for business loans vary, with some lenders mandating that applicants possess either a certain personal credit score or business history before being considered. Other lenders may request collateral, and/or require personal guarantees in which case any incurred loans must be paid back in case the business collapses.