If you are looking for debt financing, there are many options to look into. It includes banks, commercial lenders, personal credit cards and the Best Money Lender Singapore. Before you approach the lender, you have to pinpoint the exact type of loan.
This will help them to help you in deciding the type of financing that can best suit you. But still, it is better to have a general idea about the different types of loan which is going to be offered by the lender.
Line of credit
One of the most useful types of small business loans is the line of credit loan. It provides a win-win strategy to both the lender and the receiver. Small business owners should have a long term line of credit with the lender to carry out the operation smoothly and save the business from emergencies and stalled cash flow.
Generally, Line of credit can be used for purchasing inventory or the payment of operating costs for the working capital and business cycle needs. They do not support the purchase of equipment or real estate.
It comes under the categorization of short term loan that which can be extended till the upper limit of the loan contract. Every bank follows its method of funding. However, it is common for banks to transfer to the business’s checking account.
Among all the loan types, the line of credit has the lowest bank interest rate, so the risk is very low. Some lending institutions like https://lender.sg give the option to cancel the loan if the business is in the stage of shutting down.
Installment loans
This type of loan should be paid back every month that covers both the principal and the interest. Installment loans are capable of meeting all kinds of business needs. When you apply for an installment loan and it is approved by the Best Money Lender Singapore, you will get the full amount when the contract is signed.
As usual, the interest is calculated from the day of receiving the loan till the final day. When you manage to repay the loan before the final date and the interest will also be adjusted appropriately. However, the late payment will attract a penalty. The term of the installment loans will directly be related to its use.
Balloon loans
When you apply for this loan, you will get the full payment after you sign the contract. During the life of the loan, you are required to pay only the interest and only on the final day you have to pay the principal amount. Sometimes, there are also chances for the lender to give away the loan and want us to make both the interest and the principle as a single balloon payment. This type of loan is usually reserved for those situations when a business has to wait until a specific date before receiving the payment from the client for its products or services.
Interim loans
These loans are given to those small business owners who are ready to commit the payment. Usually, the interim loans are used to make periodic payments to the contractors who are building new facilities and the mortgage of the building will be used to pay off the loan.
Secured and unsecured loans
You can avail of an unsecured loan if your business can convince the lender to be prosperous and the repayment will be made on time. It has no collateral pledged as a secondary payment source.
A lender will be ready to give you an unsecured loan when he considers you as a low risk. It generally requires a track record of profitability. A secured loan, as the name refers to it, will need some form of collateral. It comes with low interest when comparing to the secured loan. When the term of the loan is more than 12 months, the lender will require collateral.
Letter of credit
It is a typical loan used in International Trade. The letter of credit documents that will allow the entrepreneurs to guarantee the payment to suppliers in other countries. This document represents the bank’s credit for the entrepreneur for a specific amount and a specific period.
Other forms of loans
Banks and Lending institutions like Lender.sg offer various kinds of loans under a variety of names. Some of them are as under
- Term loans that include both short term and long term loans
- Second mortgages are usually used in real estate to secure a loan. These are long term loans and are also called as equity loans.
- Inventory and equipment loans
- Accounts receivable loans
- Personal loans requiring your signature and collateral
- Guarantee loan – A loan in which a third party who may be an investor or spouse guarantees the repayment of the loan.
- Commercial loan – Commercial loans are standard loan which is offered by the banks for small business.
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