The Lowdown on Business Loans
- Topics:
- Alternative Financing,
- Bank Financing
- Source:
- vFinance.com
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Overview: The article states that a loan is based on a simple idea. Someone gives money, and the other person promise to pay it back, usually with interest. Since one must pay back the lender whether the business is a fabulous success or a miserable failure, the entire risk of the new enterprise is placed squarely on the shoulders. A commercial lender will be unwilling to lend money if it looks like there is much chance the money will not get repaid. A lender will very likely ask for security for the loan. A friend or relative may be willing to lend money on a handshake. It is always a better business practice to put the loan in writing and to state a specific interest rate and repayment plan. If the interest rate on the loan does not exceed the maximum rate allowed by the state's usury law, the lender is free to work out the terms of repayment. One must avoid loans with prepayment penalties. Lenders, with the possible exception of friends or relatives, will probably require providing some valuable property -- called security, or collateral. If a person is married, the lender may insist that the spouse cosign the promissory note.
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Format: HTML | Date: Jan 2003 | Pages: 1
