Starting your own business is no joke. Aside from time, you would also have to invest money in order to run your business. This money in question is what we call “capital”, or the initial amount spent in forming the basic foundation of your business. Think of it as the amount that you may need in setting up your own burger stand, as you would need to purchase the buns, patties, condiments, and the fryer itself just to make a few sales within the day. When you have no money to start your business though, you would turn to loaning establishments, just to be provided with the main capital. And in doing so, there are various types of loans to choose from, depending on your business needs. With this, we had enumerated three types of business loans with their key features to help you decide which one to choose in setting up your business:
One of the most basic types of loans, this one enables you to borrow money for a certain period of time (between one to ten years, even 30 years in some cases) before paying it back, with added interests. This is like borrowing money from a friend, and then paying it back at a promised date, the only difference is, your friend wouldn’t ask you for an interest. This is applicable for start-ups, as it enables you to pay after a long period of time, as long as it is within the agreed term. Takes note that before you may file for a loan, your credit score will come into play.
A credit score is somewhat similar to an approval rating, if you happen to pay your fees on time, you have a much higher chance of being allowed to borrow money, and vice versa.. This type of loan is usually offered by banks, thus providing you numerous options when it comes to preferred branches and varying policies.
This is similar to term loans; however, you are only allowed a short amount of time (usually 12 months) for you to pay it off. Of course, a shorter time would mean lesser amount of money to be allowed for the loan. Also take note of collaterals, as once you fail to pay back at the agreed period of time, the loaning establishment would take something in return, usually coming in the form of properties, such as cars or houses. Collaterals are basically your personal possessions, those of which you would have to write down as things that may be taken away from you once you fail to pay back the loan. Just like Term Loans, this is offered in banks, again providing you numerous options when it comes to preferred branches and varying policies.
Also known as equipment financing, this type of loan provides you with the capital to purchase needed equipment or machines for your business. If you’re setting up a tailoring business, then weaving machines are the best examples of this. This one is also advantageous from the other types of loans, owing to the fact that once you fail to pay off the required amount at the agreed period of time, the equipment would act as the collateral, instead of your personal belongings, a much better option when your properties have their own sense of sentimental value.
After learning of these various types of loans, you are still doubtful of which one would best work for you and your business. Well worry no more, as we at Cebuana Lhuillier offer Lucky Loans, a multi-purpose loan offered to SMEs such as restaurant and mini groceries, among other businesses. So what are you waiting for? Visit your nearest Cebuana Lhuillier branch now – we assure a fast, easy, and secure transaction.