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What is a Business Loan?

A loan granted by the bank for the purpose of business is called a business loan. There are various types and sizes of business loans that one may consider depending on the business needs and requirements. There is a specific process to follow while applying for this loan and.

Will it be easier to qualify for a business loan if an individual has a Limited Liability Company (LLC) with a good credit score?

This will help with the decision-making.

Will principal on a loan taken from a relative be deductible?

Any principal amount on a loan, no matter where it is taken from, will be deductible.

Is it possible for an individual who was convicted of a felony to get a small business loan?

It may not be very easy; however, the individual may apply with the Small Business Administration guaranteed loan program. If the offense that was committed is not serious or if the charge was at least 10 years old, then the individual may be able to get the loan.

Can an individual get a business loan if he/she wants to buy an existing business?

It may be a little difficult to get such a loan as the bank will be looking for a security themselves before approving the loan. Another thing that the individual may try doing is getting money from an Enterprise Finance Guarantee. These resources have been set up to help people who do not have normal sources of finance due to improper security.

How difficult is it to get a new business loan?

Acquiring a new business loan may not be a very easy task. One could try to go to the Small Business Administration or SBA for the loan or their local bank. Having a business plan already in place could increase one’s chances of getting a loan. Also, it is a good idea to show some collateral so the bank has a sense of security when approving the loan.

Up to what percent can an individual get a business loan against his/her own personal investments?

In most situations, the individual may be able to borrow up to 50% of his/her stocks and bonds for a business loan. However, the decision will be taken only after assessing their ability to pay back the loan.

What steps should an individual follow before applying for a business loan?

The following is a list of steps one should follow when applying for credit: 

  • The individual must legally incorporate the business in the state in which he/she will be conducting operations. They may register the business either as a corporation or a limited liability corporation. However, if the business is registered as a sole proprietorship or partnership, then he/she will be personally liable to the loan. 
  • Having a business plan is a must. The person may also take up classes that are conducted by the small business administration to create a business plan. The plan should indicate the market need for the business, the projection of profit and an analysis of the competitors. A business plan like this will tell the bank that you have done your research and have knowledge about the industry. 
  • Try and get investor financing. One good source for such financing is mezzanine investors. These investors accept equity instead of repayments. 
  • Request a traditional lender for a loan. 
  • Try and reduce the cost of your loan with the help of a guarantee from the small business administration. 

The procedure that is followed to apply and get a business loan can be complicated at times. You need to make sure that you have all the documentation required. You need to be aware of all the rules and regulations involved in the loan process so that you can complete the procedure without any trouble. Consulting an Expert for any questions regarding these loans and the loan process will ease any frustration or worries one may have.

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