Monthly Archive: November 2016

Types Of Credit Facilities For Businesses

You do not have to be a financial expert to be a successful business owner, but you should certainly be well familiar with the main credit options that are available to you. This will help you make the right decisions regarding the financing of your venture now and in the future or easy way to secure finance. Take a closer look at the facilities that you can select from.

By Purpose

• Investment financing – You can take out a loan to finance any business project and more precisely the purchase of any particular investment product from land to machinery. Usually, the investment product is used as security. There are more specific options like commercial loans property development. With them, the security is the constructed property.

• Cash flow management – These credit facilities are designed to help businesses manage their cash flow when there are considerable time lags between the outflow and inflow of cash. They range from small secured and unsecured loans to credit cards and bank account overdrafts.

By Nature 

• With security – Since the level of risk is high in business, most loans available to starting and small companies require some sort of security or find financial answer you need. It could be a physical or financial asset. As explained earlier, virtually all loans providing financing for investment including commercial loans property development are secured. While there is a chance to lose the asset, the interest rate is lower since the security offsets the risk for the lender. This makes the payments smaller and the repayment process easier.

• Without security – These loans are typically provided to businesses with stable revenue and considerable experience in the respective industry. The lender also considers the value of the assets which the company possesses and other types of credit that it has. Usually, the unsecured credit facilities are for smaller amounts of money.

By Term

• Short term – The credit facilities with a term shorter than one year fall into this category. Since the repayment term is small, the loan amount is typically small as well. In general, with a shorter term, the credit facility is cheaper, but the regular instalments are higher.

• Long term – These loans have a term of over twelve months. They are typically for larger amounts of money. The ones with terms over five or ten years are usually backed with security. 

Now that you know what options are available to you, you can make the best choice depending on your needs and the position of your company. You have to prepare a solid application to get approved.