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Bank Loans

Banks offer a wide variety of loan types to meet customers' financial needs and to attract new customers. Understanding how loan costs, terms and interest rates affect the amount you pay monthly, as well as the total amount you pay over the life of the loan, can help you choose wisely. Banks offer loans with fixed interest rates. This means the interest rate and monthly payment will stay the same for the term of the loan. Banks offer variable interest rate loans, as well. The interest rate can change moving up or down causing the borrower's payment to increase or decrease, sometimes monthly. Unsecured loans, sometimes called signature loans, are loans that do not require any collateral from the borrower. Secured loans do require collateral that the bank can claim if the borrower defaults. Small Businesses may obtain financing for various aspects of business operations through specialized bank loans. This will illustrate the various types of loans available to business owners through banks in addition to indicating how such loans can be approved. A discussion of a few banks and their loan will also be provided for the purpose of further illustrating the types of loans available.

Business Credit Card Loans
Business Credit Cards Loans have higher interest rates but can be used for solid bookkeeping. The reason credit card loans are good for bookkeeping is all the transactions are recorded electronically, immediately or soon after the expense has been charged. This can lower accounting expenses as some of the financial reporting is included as a service of the loan.

Lines of Credit
A line of credit may be either a secured or unsecured account i.e. collateralized loan or uncollateralized loan. Lines of credit are similar to credit cards but usually have interest rates based on the prime rate and are thus lower. Lines of credit are more flexible than credit cards because they also act like accounts and checks can be written against them.

Equipment and Machinery Loans
Equipment and machinery loans can include vehicles, tractors, conveyor belts, irrigation systems etc. Many types of businesses have unique equipment and/or machinery needs for which these loans are designed for.

Cash Flow Loans
Cash flow loans are used to finance periods of time within the cash conversion cycle. In other words, the time between providing a service, invoicing, and receiving the payment and then paying creditors. The shorter the cash conversion cycle is the more money a business can save in cash flow expenses such as interest on the cash flow loan or other source of credit. Companies that operate on a cash basis may not have the same requirements for cash flow as a business using the accrual method of accounting.

Debt Refinancing Loan
Banks also offer debt refinancing loans that can consolidate other business debt at a lower interest rate. For example, if company A has 3 credit cards with other banks at an average interest rate of 14%, Bank B may be able to provide a loan refinancing all 3 credit card's debt at a lower interest rate. This allows the bank to acquire new business and the business owner to obtain a lower monthly payment.