WHAT TYPES OF BUSINESS LOANS

Articles In This Section:

· Form of business and financing

· BUSINESS ADVANTAGES OF OPERATING AS A SOLE PROPRIETOR

· BUSINESS DISADVANTAGES OF OPERATING AS A SOLE PROPRIETOR

· BUSINESS FINANCING

· WHAT TYPES OF BUSINESS LOANS

· LOANS FOR THE BUSINESS

· A LINE OF CREDIT FOR THE BUSINESS

· How a Sole Proprietorship is Taxed

· BUSINESS ADVANTAGES OF THE PARTNERSHIP FORM

· BUSINESS DISADVANTAGES OF THE PARTNERSHIP FORM

· THREE RULES AS BUSINESS PARTNERS

· BUSINESS TAXATION

· BUSINESS CORPORATION

· BUSINESS DISADVANTAGES OF THE CORPORATE FORM

· BUSINESS CORPORATE FINANCING

· BUSINESS STOCKHOLDER ELECTION TO REPORT CORPORATE INCOME

· MAKING THE BUSINESS ELECTION

· HOW THE BUSINESS ELECTION IS LOST

· BUSINESS ADVANTAGES AND DISADVANTAGES OF STOCKHOLDER REPORTING OFCORPORATE INCOME

What kind of loans can you make? A sole proprietor will often make a "character loan''' A character loan is actually an unsecured loan made without collateral and based upon your general integrity, business standing, management ability and earning capacity.

Closely associated with this type of loan is the "line of credit." This is an advance commitment by your banker to lend you money up to a certain maximum. The line of credit is on a revolving basis so that you can have more than one loan out at a given time as long as you keep within the agreed-upon maximum. This will also save you in interest cost in comparison with a similar loan equal to the maximum sum required at any one time.

You may be able to make a "term loan" This is a loan repayable according to an agreement between a lender and borrower over a period of more than one year. One advantage of this loan is that your repayment schedule can be scaled to fit your earning power.

You may also make loans secured by the pledge of accounts or notes receivable. Such loans may either be made on a notification or a non-notification basis. On the notification basis, the bank tells those who owe you money that it is lending it to you on the security of your accounts receivables, and the bank also undertakes to secure payment directly from them.

On the non-notification basis, the bank does not inform your debtors about the loan. They remit to you in the usual way and you pay back the loan to the bank. The charges on this type of loan are usually higher on account of the greater risk to the bank.

Your bank may also be willing to negotiate a loan with you on the security of a bill of lading for your inventory located in warehouses.

For the purchase of heavy equipment, you may be able to get an equipment loan from the bank using installment notes receivable as collateral, or you can discount these notes with a bank or finance company. You may also get an equipment loan by giving a mortgage on personal property as the form of security.