Doing The Right Way

Advantages of Business Lending
Business lending involves banks or financial institutions offering loans to businesses once they ascertain their capability to pay back the loan at an interest. Banks usually prefer to as compared to individuals because they are more capable of repaying the loans. Banks gain through interest charged but they do not claim ownership of the business once the loan is given. Both businesses and banks benefit from business lending. Central bank sets the percentage that is supposed to be charged as interest by the financial institutions depending o the time the loan will take to be cleared. Hire purchase , fixed assets,factoring and working capital loans are some of the loans offered by the banks. This document will discuss the merits of business loans.
Business loans are good for business as they use the money as capital for the business. Businesses require money to start operating. This money could be gotten from various places. Bank loan is one of the ways to get financing. This is good since a business might not have enough money to finance itself and the bank loan will help the business start operations.
A business is able to use the bank loans for growth. A business will need more cash for growth after it has already been set up. The bank may need to finance the business on its growth venture since the business may not be in a position to finance its own growth. In order for a business to avoid stagnating it is important to keep growing. There is more productivity in the business as it grows and this is of benefit to its customers as will as all stake holders.
A business may have a need to acquire an expensive asset to be used in the business. The business will turn to the bank for loans to finance this purchase and will be granted fixed assets loan. The asset will guarantee itself on the loan. This is an advantage to the business as it is now able to acquire the asset that it would not have afforded by itself. The asset will be used in the daily operation of the organization.
The business is well aware of the amount of interest payable on a monthly basis. This is due to the bank giving a fixed term repayment period for the loan. The business is therefore able to pan itself for repayment of the loan.
The amount loaned is used to determine the loan repayment period. The bank does not require the business to pay back the loan at one go. Monthly repayment period is agreed by the bank and the business and it involves a certain duration of time. Repayment period ranges from one to ten years depending on the agreement.

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