Essay Loan Loans From The Bank

Essay Loan Loans From The Bank

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Bank loans are loans from the bank which is based on the future value of the business. Banks are very particular when it comes to granting loans because they want to be sure that the borrower will be able to repay. In some situations, if the loan is not repaid to bank can take possession of the borrower’s personal assets. Even though the bank pays for the business, they do not take possession of the establishment. Figuratively, when Joe Smith pays off the loan, he doe not have any more ties with the bank, unless he asks for a subsequent loan. A precaution that must be taken when requesting a loan is the cost of bank loans. Interest rates are very high and must be paid regardless of if the specific business became successful. This is a huge risk that new business owners, who decide to take out a loans, have to take. Borrowers receive tax deductibles which makes it easy for businesses to make monthly loans payments and keep up with interest rates.
US Small Business Administration (SBA) loan is the most common loan program for small businesses. They offer the the “7(a)” loan which is the easiest loan to get. The loan does not actually come from the SBA, it comes from a lender and a portion of it is guaranteed. Because lenders can lower its standards, which means the small businesses who do not have good credit histories can qualify. Lenders observe to potential business earnings, collateral and resource management. According to the SBA to qualify a small business must have these characteristics. The must me in the Unites States, demonstrate a need for a loan, no prior U.S debt, meet the SBA definition of a small business and operate for profit. There is no minimum for the size of the loan but the maximum is five million dollars. M...


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...t. Using their connection could have amazing benefits. Unfortunately, the owner does lose some control. Because the VC are putting their money into a business, they want to be very involved. The size of the financing loan determines their level of involvement in a company.
Private placements in stocks are very customizable and flexible when it comes to raising money. These investors are more patient and less aggressive than venture capitalists because they wait a longer time before asking for their investments back. This route is also faster. The downside, is like many other financing options, it requires owners to give up some control. Private investors can also have access to all of the financial records. On the upside, it is less stress on the owner because of help from investors and the fact that there isn’t any repayments involved unlike a commercial loan.

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