Running a business depends mostly on the availability of funds. From the cost of labour to the cost of raw material, building and equipment, there is a constant need to expend money. However, affording such cost as at when needed can be quite challenging.

This is where a business loan becomes relevant. However, it becomes tricky where you have a bad credit status. Well, it is not the end of the world.

You can get a bad credit business loan. It is financial assistance that allows your business to meet its cash needs, and flexibly at that. With it, a business receives the money or asset it requires regardless of its credit status. Then, it commits to the repayment of the cost in addition to interest over a period.

Categories of Business Loan

You can apply your business loans to the following category.

Equipment Financing

You can apply your business loan to the financing of business equipment. This equipment ranges from IT equipment such as computers, security infrastructure to manufacturing equipment, and processing equipment, among others.

Commercial Construction Loans

If you are also a business within the construction industry, you can apply a business loan to the completion of a construction project. Usually, this is a short term or midterm loan with its repayment schedule within a year.

Working Capital Financing

You can also apply your business loan to fund your working capital needs. Usually, these loans are short term and help your business run through its day-to-day operation.

Available Loan Type

When looking to obtain financial aid for your business use, you can receive this through various forms. The available loan type that you can maximise for your business loan are:

Secured Business Loan

Under this category, you get the loan sum by using your assets as security. Usually, in this case, your interest obligation is lower due to the reduced risk that comes with secured loans.

Typically, your secured business loan can also take two forms.

Residential Secured Business Loan

Here, a business secures the loan arrangement using the home or other property of its business owners.

Commercially Secured Business Loan

Here a business secures the loan arrangement using its office, warehouse, or other company-owned building.

Unsecured Business Loans

Under this category, you obtain the loan sum without using any asset as security. Usually, in this case, your interest obligation is higher due to the increased risk that comes with unsecured loans

Available Loan Option

You can obtain a business loan through the following options:

Business Overdraft

You obtain this through your business bank account. Precisely, it is a funding method where your bank allows you to withdraw more than you currently have inside your account. Although, within an authorised limit.

In turn, you discharge your obligations with receipts or deposit into the account. Typically, this is suitable for short term purchases rather than long-term financing and capital purchases.

Chattel Mortgage

This option is useful for equipment financing. With this option, your lender purchases the equipment of your needs and transfers ownership of the equipment to you. In turn, you commit to paying back a price covering the interest and cost price of the equipment. Then, upon full repayment, your ownership of the equipment gets free of any limitations.

As a secured loan type, you secure the loan agreement using the equipment you get.

Commercial Hire Purchase

This option is also useful for specific equipment or item purchase. With this option, your lender purchases the equipment of your needs and provides it to you on hire. In turn, you commit to paying back a price covering the interest and cost price of the equipment. Then, upon full repayment, the lender transfers ownership of the item to you.

Factoring

This option is also regarded as accounts receivable finance or debtors finance. With this option, you sell your receivables and outstanding invoice to a factor business or company.  Typically, they buy it a cheaper rate than it is worth. Then they go on and receive payment from your debtors.

This option allows you to access funds without any repayment or interest obligation.

How Does Business Loan Work?

If you are looking to get a business loan, you will go through the following process.

1. Application

You will need to send in an application showing interest in the business loan. Typically, you will need to provide various information ranging from the statement of your business financial position, business plan, financial reports of the last three years, financial forecasts, and personal financial details.

Also, where you decide to obtain a secured loan, you will need to supply details of the asset you intend to use as security.

2. Assessment & Approval

At this point, your potential lender will examine your details and finances to ascertain if you qualify for the loan you intend to get. Then when you do, you get approval.

3. Repayment

Next up is the repayment of the loan obligation, as you agreed to in the contract. Usually, this is monthly. However, some lenders will allow you to select other repayment schedules, such as weekly or biweekly, to fit your budget.