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Business Loans
A business loan is a loan provided to companies by a financial institution to meet operational, expansion, or other business-related expenses, with repayment made over time with interest. Businesses use them for needs such as working capital, equipment, inventory, real estate, and growth, and loans can be secured (requiring collateral) or unsecured. What it is:
- A sum of money borrowed from a lender (like a bank or other financial institution) with an agreement to repay the amount over a specified period.
- Interest is charged on the borrowed amount, increasing the total repayment cost.
Common uses for business loans:
- Working Capital: Covering day-to-day operational costs, like payroll, supplies, and rent.
- Business Expansion: Funding initiatives to grow the business, such as opening new locations or entering new markets.
- Equipment & Asset Purchases: Buying new machinery, vehicles, technology, or real estate.
- Inventory Management: Purchasing goods or raw materials to meet demand.
- Managing Cash Flow: Bridging gaps in cash flow during busy or slow periods.
Key Characteristics:
- Secured vs. Unsecured: Loans can be secured, requiring the borrower to pledge collateral like property or equipment, or unsecured, relying on the business's creditworthiness and income.
- Repayment Terms: Borrowers agree to a specific repayment period and payment schedule (often in Equated Monthly Installments or EMIs).
- Purpose: Loans are specifically for business needs, differentiating them from personal loans.
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