Types of Loans

Types of Loans


Banks and other financial institutions can assist you by
providing funds through personal or commercial credit. Examples
of personal credit include automobile loans, credit cards, and
home mortgages. Commercial credit includes business loans; here
are some of the options:

Short-term loans are one of the most common types of
business loans and are usually for less than one year. They can
provide interim working capital for a business temporarily in
need of cash, and are typically repaid in a lump sum when
inventory or accounts receivable are converted into cash.

Intermediate-term loans are often used for a business
start-up, the purchase of new equipment, expansion, or an
increase in working capital. The maturity dates range from one
to three years.

Long-term loans generally are made for major capital
improvements, acquiring fixed assets, or business start-ups.
The term of the loan runs for periods of three to five years
and is usually based in pan on the life of the asset financed.
Repayment is usually made in monthly or quarterly installments.

A line of credit offers you the ability to borrow money
repeatedly, up to your credit limit, without having to reapply.
A line of credit is particularly important to businesses that
experience seasonal fluctuations. The lender generally will
perform a review once a year, at which time the borrower is
asked to provide updated financial statements.