Becoming an independent entrepreneur has an excellent reputation in the community, but entrepreneurs face great challenges at the beginning of their business. Overcoming all obstacles to a businessman’s success can be a great challenge for an individual. One of the many problems that everyone faces is financial. Even large entrepreneurs from all walks of life faced a huge financial crisis in order to start their business and carry out their daily operations. Therefore, finances play an important role in the life of a businessman. Big ideas need financial support to thrive in successful businesses.
There are many sources of financing for a business. Banks are the most reliable source. There are many reasons why people choose banks as the best source of financing for their businesses. Banks provide cheaper funds to companies in the form of loans. There are different types of business loans with different interest rates that help entrepreneurs solve their financial crisis.
Types of Business Loans
There are different types of business loans that require financing at different stages of the business. The needs are also different and banks help them provide different types of loans to businesses to help different SMEs raise funds.
Loans for new projects — Banks are interested in financing new businesses and new existing business projects. There are different criteria for new project loans and vary from bank to bank. Project loans are approved with guarantees such as residential properties, commercial properties or vacant land as collateral.
Additions to existing loans — These loans are used to expand, replace or diversify existing operations. These loans are approved in the short or long term for the purchase of goods, machinery or other capital assets for the business.
Working Capital Loans — These loans are provided to businesses to resolve unforeseen financial crises and are repaid within a very short period of time. Banks are more interested in providing working capital loans secured by stocks, shares or receivables of a company.
Insured Business Loan — Commercial loan in which a company raises funds with a bank guarantee. The loan may include land, residential or commercial premises, gold, shares, bills of exchange and insurance as collateral to finance your operations. A lower interest rate is desirable.
Unsecured Business Loans — Not all entrepreneurs have the ability to provide collateral when they obtain a commercial loan. Therefore, bankers help them get unsecured loans based on banking transactions and tax returns. These loans have higher interest rates than guaranteed commercial loans. Banking requirements. Banks follow several steps and procedures to provide funds. The following procedures and documents must be provided to the bank.
Proof of identity and address of the company — Address and proof of identity of the company or the owner of the company. Legal registration of the company: Is the company legally registered in accordance with government regulations and all legal procedures have been followed to establish the company?
Company Financial Statements — Each bank is interested in the company’s latest transactions in the past year. For traders, it also plays an important role in determining the amount of the loan. Financial Guarantee — This includes the company’s fixed and movable assets, which helps bankers consider commercial loans based on asset value in commercial transactions. It also protects the bank from the bankruptcy of the entrepreneur for failure to repay the loan amount.
Credit history — This is a very important factor that banks need to consider and help them assess the financial situation of the company and verify previous loan payments. Litigation — This will help the bank assess the character of the entrepreneur before making a loan to the business.