A wrong loan means a bad decision and bad decisions are not good for business. The bottom line is that it is imperative for you to know which loan is best tailored to fit your business requirements. There is a long list of different types of loans to cater different financial needs of different businesses. To choose the right loan can act as a booster for your business. Be smart and study the loan field to pick the right loan that is low on interest rate and with a flexibility to pay in full at any time during the loan period.
CATEGORIES OF LOANS
Basically, the loans are divided into two categories, firstly, secured loans and secondly, unsecured loans. Secured loans require you to pledge your property against the loan so that the lender can recover the loan and costs in case you default. Since, the lender has the home as a guarantee they let you borrow more money than an unsecured loan and the interest rates are also lower. But the risk of being losing the house exists if you fail in repaying the loan.
Unsecure loan puts the lender at risk if repayments are not made. The loan amount is limited and the interest rate could be higher. In an unsecured loan be careful with the borrowed amount to keep the monthly payments at an affordable level.
With an unsecured or personal loan you can usually borrow up to £25,000 over a period of 1-10 years. These loans don’t require you to secure property against them, but the rate you pay will depend on your personal circumstances.
You can tailor the amount you borrow and the repayment term, so the monthly payments are set at a level you can afford.
Guarantor loan requires a guarantor with a sound credit to assure the lending institution that increase the borrower defaults than the guarantor is responsible to repay the loan.
ADVANTAGES OF LOANS
Right loan at the right time for your business is like a friend in need is a friend indeed. The loan field is competitive and it is equally important to understand and study different types of loans and get the loan with the lowest possible interest rates and soft terms to benefit your business.
Free cash flow has taken center stage along with earnings and balancing revenue growth in boosting of businesses. Therefore, businesses that focus and manage working capital have an edge on the competitors and acquire a bigger share of the markets.
Growing businesses require working capital. Day to day operations of you business consume a certain amount of money-working capital. Current assets of your business minus the current liabilities are one way of looking at your working capital. The second form of working capital is the stocks plus the trade debtors and minus the trade creditors. The latter definition gives a better picture of the efficiency of your business operations.
If working capital outpaces sales then we need to check the credit terms or see there is no over stocking because in either case the conversion of profits into cash flow slows down.
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