Looking for business loan generally refers to the process by which a business owner researches and compares the different financing options available to find the one that is best suited the needs and capabilities of the business. Most business loans are available from the Small Business Administration (SBA), commercial banks, and non-traditional finance companies.
Most businesses consider the SBA when looking for business loans because this agency’s goal is to help small businesses succeed and contribute to the economy. The most common loan offered by the SBA is the 7(a) loan, which is available to small business owners who have been denied traditional financing and who can prove their ability to repay the funds borrowed. This loan requires applicants to submit business and personal financial documents and a business plan in order to be considered for approval. Other variations of the 7(a) loan may require additional documentation. Interest rates and repayment terms vary depending on the business’s financial stability and the type of loan obtained.
Most start-up small businesses do not look to commercial banks when looking for business loans because banks see them as too high of a risk. However, established small businesses may be able to obtain a bank loan with the necessary documentation. Like with the 7(a) loan, interest rates and repayment terms will vary.
Another option when looking for a business loan is an independent financial company. These companies usually accept high-risk borrower, such as start-up businesses or businesses with poor credit. Because they do accept high-risk applicants, their interest rates tend to be much higher than SBA and bank loans.
People looking for business receivable are usually referring to accounts receivable, an asset account that tracks the money owed to a business. This account is considered an asset because it records money that is legally owed to a company. Businesses often allow individuals and companies who purchase frequently or large quantities of products to buy those items on company credit. To add a transaction to the receivable account, the receivable must be debited and the revenue account must be credited. Once an account is paid off, the account receivable is credited and the cash account is debited to balance the business’s accounting ledger.
Businesses who offer credit accounts must be prepared for customers who fail to pay their accounts on time. To encourage quick payments, many businesses offer discounts to accounts paid off within a short time period and charge late fees to accounts that are not paid in time. If a customer continually fails to pay his or her balance, the business has the right to turn the customer over to collection agencies and attorneys to receive payment.
Because the business receivable account is an asset, it may be used as collateral for funding. Lenders may allow a business to use the accounts receivable and other assets to secure a loan with a lowered interest rate. Businesses can also sell their receivable account to another company for immediate cash. This financing option is known as factoring, and it is not considered a loan.
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