Friday, January 10, 2020

The basics of the money loan

The basics of the money loan

Are you thinking of starting a business but you don't have money to do it? Well, you are not alone.

A loan is borrowed money and must be repaid along with interest. If the money is borrowed from an institution like a bank, this is called a commercial loan. The money borrowed from a friend or relative is called a personal loan.

The borrower, or debtor, is the business or individual that obtains the loan. The term or period is the specified time during which the borrower has to use the money borrowed before paying the loan. The maturity of a loan is when the term of a loan comes to an end. The principal is the amount borrowed from the lender. When you or your company borrow money, the lender wants to know when they will get your money back. Keep this in mind when looking for a loan source.

If the company cannot repay the loan, the credit source has the right to legally obtain the assets to recover their money. The extent to which you are personally responsible depends on the commercial structure under which your business operates.

If a loan is approved, you will have to make scheduled payments (usually monthly) plus interest. A loan can sometimes be set up as a global loan. A global loan will generally require smaller down payments and a lump sum of what was lent as final payment at the end of the term.

Institution Loan
Commercial loans generally fall into two main categories: short and long term loans. A short term loan is a loan that must be repaid within one year. Examples of short-term loans include:
Loans for working capital
Accounts receivable loans
Credit lines
Long-term loans are loans that must typically be repaid from one to seven years. Long-term loans are generally used to:
an expansion of a business
equipment purchase
real estate
The majority of commercial loans used to start a business are long-term loans.

When you approach an institution to obtain a commercial loan, you will consider it as the owner of the company as closely as you will to the company itself. One of the ways in which credit institutions earn money is to lend money and want to be as safe as possible to recover their money with the interest owed.

The time between requesting a loan and knowing that it has been approved (or disapproved) may vary. If you do not approve, you may be notified almost instantly. If they approve it, it can take a few days, although it usually takes longer. It may even take several months to know if you or your company have been approved for the loan.

Loan from family and friends
If you do not want or cannot obtain a commercial loan, you may consider obtaining a private loan from family or friends. This is usually very informal. However, you must be careful because this can lead to ruined relationships.

If you are getting a private loan, it is best for the lender to have a written agreement. The written agreement must indicate the capital, the interest charged and the repayment terms. This puts the lender in a better position, either canceling the loan on your tax return or legally going for you.