BUSINESS LOANS
KNOCKOUT BUSINESS LOANS
A business loan does what it says on the tin. The lender advances a set amount at inception which is then repaid using fixed or variable monthly repayments over a set period of time. The parameters for the loan are set at the outset and are complied with throughout the term of the loan. Whilst what it is, is relatively simple, there are two important sub-categories in business loans which are important to understand.
THERE ARE 2 MAIN VARIATIONS OF BUSINESS LOANS
UNSECURED BUSINESS LOAN
Unsecured business loan – No tangible security by either the business or individual and is secured via an unsupported personal guarantee from the owner(s).
SECURED BUSINESS LOAN
Secured business loan – As the above but is secured against something more tangible like a 2nd charge on a home residence or the business unit. This is often less expensive than the unsecured option.
- Making capital and interest repayments mean that you are repaying the debt as opposed to revolving facilities where you only pay interest and are left with the debt remaining
- You can use the proceeds for absolutely anything!! Rarely restrictions are put in place for this so you can use to purchase stock, pay off a minority shareholder, pay taxes, buy another business – literally anything you want!
- Often only a personal guarantee is required, leaving the business assets to be used elsewhere and personal assets remain unencumbered
- A set schedule of repayments make planning easier