Funding Source For Business Loans

135

Any business requires capital. One of the toughest assignments while initiating a new business is to look out for an appropriate funding agency providing a good amount of capital in the form of business loan.     

Before looking out for a funding agency, one must first understand the nuances of business loans. Business loans can be broadly classified into four categories that include long term business loans, short term business loans, business loans against equipment and credit lines. Long term loans are the most popular type of business loans. The loan is repaid in the form of monthly installments to the funding agency over a specific period of time. Short term loans are the least preferred type of business loans. These loans have to be repaid in full within one year.  In case of loan against equipment, financial institutions issue loans keeping the equipment brought through the funds as collateral. Credit line is another type of business loan where the funding agency provides every year only a certain percentage of the entire loan amount.

The next important aspect is about the funding agency. There are various banks, federal agencies and independent financial organizations offering secured and unsecured business loans to even startups and smaller businesses. The foremost eligibility criterion for a business loan is to have a good business plan that is appropriately supported with quality documentation. Documentation should include reason for taking a business loan, amount required, details explaining utilization of loan amount, repayment plan, personal finance statements, balance sheet and tax returns of the company, cash flow estimates on monthly basis and profiles of people in the management.