Loan options are given for building business to the government, companies, individuals by credit agencies, Private institutions or foreign credit institutions. Domestic credit is usually up to the satisfaction of certain budgetary needs. We usually know about Banks. We are talking about Loan Options for Building Business because we already talked about Entrepreneur, How to Create Private Limited Company.
Loan Options for Building Business : Types
Loans can also be sub-categorized according to whether the debtor is an individual person or a business. The credit score of the borrower is a major component in and underwriting and interest rates (APR) of these loans. The monthly payments of personal loans can be decreased by selecting longer payment terms, but overall interest paid increases as well.
Broadly, we can divide the types in to :
- Secured
- Unsecured
- Demand
- Subsidized
- Concessional / Soft Loan
We will not discuss all types in details as they are usually not required for Business. Most are Start ups, the conventional method was offered by Governments indirectly via Banks, which is known as Loan without Collateral or Collateral Free Loan. In this case, usually the borrower is given the Loan for buying the needed things for starting the business. The purchased properties, virtually becomes the Mortgaged property. This, although sounds great, is only allowed for certain business types where the Country will get benefit from production from the industry.
These all terminologies are related to Economics and a serious borrower must consult a Lawyer, at minimum of his/her own for checking the terms and conditions. These Loan without Collateral or Collateral Free Loan has various different sub types and schemes in different countries.
Loan Options for Building Business : Only for US and India
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For both of the Countries, practically only searching with the keywords – Collateral Free Loan in Google web search will offer you huge amount of Ads plus results. However, you must understand that, if the interest rate is more than the net revenue, obviously you will get in to debit ! This words are frequently used to make the newbies confused, so explained for the noobs in friendly manner :
- Base + 3.4% (for example) : People can not understand the fact – Base rate is what is already existing rate for all, suppose it is 12%. Then the total will be 12+3.4% = 15.4%. Any interest rate above 16% can be proved to be dangerous. In course of ~8 years, total amount payable (Principal+Interest) reaches to double with near 16% Interest. Your things manufactured should make money with not less than 70% profit. So, one aspect of these measures is what we see – a computer could be sold at $100 but sells at $170.
- Coverage of Collateral Free Loans has limitations in amount – so split projects…
- Never ever go for with Collateral, i.e. Mortgage Loans. The terms might be dangerous. Big ship sinks in Mortgage Loans. It is better to sell the property than going for Mortgage Loan ! Depending on the terms and conditions all can be eaten by the lender! Make it clear – if you have a property of 10 Millions USD, then go for Lease or Sell it to get the money. Why you will make it a donkey to get another 5 Million. With interest; your Loan of 5 Millions actually get doubled in ~8 years. But if you sell or give at lease – in 8 years, if you do not do anything and put in proper schemes, it will be doubled – 20 Millions.
- No Governments, no Bank has any kind Loan Charity ! All virtually has no very great intention. None we guess has a mentality to cheat, but the Lenders Income is that Loan ! So, quite obviously, for non-Government, it is not abnormal to think what people usually says – yes, they can lend you knowing that your business will have less return – but they can eat your all
- Giving loan is also a business. Quite good business!
Start from small to medium and then grow. Do not take a huge loan, never get terrified if you can not pay back – take help of Law. None can make you fearful for unintentional failure in business.
