A business loan is the type of loan that a person applies for when they want to enhance their existing business, start a new business, or need help running their business by using the money to update equipment, buy new equipment, etc. There is a variety of different types of loans that fall under this category.
• Secured loans-with this type of business loan the business owner uses their assets as collateral against this loan. When they do this, they get the loan. The assets make this a secured loan because if the loan is not paid back the one who made the loan will get possession of the assets. The lender can recover the money they lent to the business owner by selling the assets. Some of these types of loans include a mortgage loan where the assets here would be the borrower's home or a non-recourse loan which is where the lender's only claim against the borrower is the assets they put up for collateral.
• Unsecured loan-this is a loan where the borrower does not put up any type of collateral in regard to getting the loan. If the borrower defaults, the lender has nothing they can take to regain the money they lent. It is a harder type of business loan to get because of this factor, but it is a cheaper type of loan. Most of the time the borrower needs to have a good credit score to get this type of business loan.
• Start-up loans-this is a very basic business loan in which it is used to start a new business, but before you even try applying for this type of loan it is advised that you do some meticulous planning first to convince the lender to loan you the money.
These are just three of the many different business loans that you can apply for. Getting any type of business loan can be a lengthy process.