Debt Financing

Types of Loans to Remove Moans

There are kinds of financial help for every need. According to Adam Jiwan, below are just some examples of loans you can avail for various needs:

Business Loans

Many dream of having their own business, which may remove them from the shackles of working for others and give them the independence that they’ve always wanted. However, most give up when it comes to finding the money needed to start the business. This is where loans become useful.

Although investing personally held money removes all the problems of seeking and fulfilling the stringent conditions for getting loans, it is not advisable to do so. It is also not a very good idea to get friends and relatives to invest in the business. Various types of loans are available, for someone to start a company, provided that person has a concrete business plan and can convince the lenders that their investment will be in good hands.

financial institutions

Debt Financing

Banks and other financial institutions are the prime lenders giving out such small business loans. There are two types of loans offered.

1.Secured Loan: This is suitably guaranteed with collateral from the receiver of the loan so that the lenders investment is safe. The interest rate on such a loan is low and it is not difficult to get this loan if the business owner provides the security.

2.Unsecured Loan: This type of loan does not involve any security and has a high interest rate due to the high risk involved.

It is not easy to get either of these loans, especially the unsecured loan, since the debtor must convince the lender that their business can generate enough money to make repayments on time. Both of these loans fall under the category of debt financing.

Equity Financing

Some companies arrange for equity financing. These companies invite investors to participate in the business with their money, but investors demand a share in the profits and a say in the management of the venture.

Other Types of Loans

Loans can either be short-term or long-term depending on the need of the business. Companies can use lines of credit to generate funds. The other alternative is personal credit cards for small business ventures, but these are uneconomical due to the high interest rates involved. Some use the equity of a home to take out a home equity loan for starting the business. This option costs less, but the risk of losing your home is high.