Business loans meant for those starting a business are commonly referred to as Startup Business Loans.
These kinds of loans usually do not imply large amounts of money but only the necessary to take a business project to life.
This type of loans are personal loans due to the fact that the business is not running yet, so the applicant's personal credit report will be pulled when a loan application is submitted for consideration.
The lender will ponder the applicant's credit score and history and the loan amount and decide weather to approve the loan for the amount requested or offer to approve a loan for a smaller sum.
Regular Business Loans On the other hand, regular business loans are not meant for those starting a new business but for those who have owned a running business for at least three years and need extra money to buy new equipment, create new divisions, finance international business transactions, etc.
The firm's credit report will be pulled when an application for a regular business loan is submitted and the firm's credit score and history will be taken into account by the lender when he decides weather to approve the loan or not.
Secured and Unsecured Business Loans Business loans come in two types, Secured and Unsecured Business Loans.
Secured Business loans require some asset to be used as collateral and usually carry less interest and present higher loan amounts due to the lower risk involved for the lender.
Given that there is an asset guaranteeing the financial operation, the lender has the right to recover his money by repossessing the asset.
Unsecured loans on the other hand, do not require collateral at all but they also carry higher interest rates and there are lower loan amounts available.
The risk involved for the lender in this type of transaction is higher and so will be the monthly installments.
Unsecured loans require a considerable business income and credit score because the whole firm acts as a guarantee instead of a specific asset.
You may be required to present a business plan.
The documentation necessary to apply will vary depending on whether you are applying for a Startup Business Loan or a regular Business Loan.
Bare in mind that for Startup Business Loans, personal information will be required and a personal credit report will be pulled.
For a regular business loan, the information required will be the firm's.
There are many online lenders that will be able to provide loan quotes so you can compare the different options available and decide which one is the right for you.
Always remember that budgeting before applying for a loan and going through your credit report in search of mistakes is the smart way to go.
Not doing so may result in a loan decline for a minor error.