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Business Loans are used for expanding, modernizing or improving small to medium scale businesses. It can be secured or unsecured.
Secured business loan means that the entrepreneur keeps something as collateral against the loan amount taken. Collateral can be anything from raw material to finished products, land and building of the business to plant and machinery. If you have the collateral for the cash advance, you can have the money at relatively cheap rates and with much more flexible repayment options. This happens because your collateral is able to stand guarantor for your repayment.
Unsecured Business Loan, as the name explains is a type of loan that doesn't require a collateral. It is typically at a higher rate of interest and is taken for a comparatively smaller tenor.Business Loan can also be explained from the point of view of the tenor:
Short-term loans are usually used for short-term working capital for a business temporarily in need of cash. These loans may be based upon seasonal fluctuations, and other short-term problems that a business may encounter. Usually, these loans are paid within 1 year.
Intermediate loans are often used for businesses that are starting up. These loans may be used to build inventory, buy equipment, or increase working capital. Working capital is money needed for business purposes such as paying employees, maintaining good over-head, and other business needs.
Long-term loans can be given to business owners that are well established and wish to increase their fixed assets, for related business acquisitions, and for expansion. Long-term loans may also be given to start-up businesses, usually for purchases of land or buildings, construction efforts, and long-term working capital, these loans have terms that run 3-5 years