How to Get a Business Loan? What are its Different Types?

Running a business is never easy. There are a number of things to manage, staff to employ, strategies to devise, and more. However, in most cases, the finances top them all.

When an entrepreneur doesn’t have enough savings of their own, they take a business loan to start a new business or even for expanding an existing one.

How do you get a business loan?

A business loan can be applied for at the majority of banks and the applications are approved on the basis of the turnover of the business and its IT returns.

The following are the steps you can take to get a business loan:

• The first you need to figure out is the exact reason why you need a loan, and how will you use it. Some good reasons include buying equipment, real estate, inventory, etc.
• You also need to check your credit score. This is because just like personal loans, business loans are also approved on the basis of the credit score of the company. So, check if yours is high enough. In case it’s not, it’s best to wait and work on it first.
• To increase your odds, you can also highlight the assets you have (gold, property, etc.). If need be, you can offer these as collateral too.

What are the various types of business loans?

A business loan is a big category which can be further divided into the following sections:

• Term loans: These are the most popular type of business loan can be obtained as long-term, short term, or intermediate loans. A short term loan has a tenure of 3-5 years, while a long term loan can have a tenure as long as 15 years.
• Overdrawing: This is a special facility that allows you to withdraw an amount that’s in excess of your existing savings account amount. For this, you are typically required to pay an interest on the extra amount.
• Bill Discounting: This one is rather uncommon, still used by many businesses. In this, you can sell some of the major invoices to the bank at a lower amount than they actually are worth.

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