Business Mortgage Broker Auckland
A Business loan is predominantly used to fund major capital expenditures (CAPEX) and/or cover operating expenses that the company may otherwise be unable to afford through the cashflow. Business Loan can also be sought to fund expansion of existing business activities OR to buy new a business such as a Franchise or an independent business.
Key attributes of Business Loan:
- A Business loan is funding arrangement between a lender (typically a Bank) and a business, utilization of funding is to fund operating costs and capital expenditures.
- Secured business loans require collateral, such as property, plant or equipment.
- Borrowing entity will be required to provide its financial statements to ascertain their ability to repay the proposed debt.
- Although most business loans are short-term, they can be “rolled,” or renewed to extend the life of the loan.
- Maximum loan term for a business loan is typically 15 years
Types of Business Loans:
Business loans generally fall in two categories namely Secured Business Loan and Unsecured Business Loan.
Secured Business Loan
Such loan is backed by some type of collateral as a condition of borrowing. If you have home lending with the same lender you are approaching for business loan, typically lender may cross-collateralize residential properties in the background after discussing with you, this significantly reduces lenders risk in an evet of default. Lenders can be flexible to lend when there is a tangible security that can be realised in the real market. Needless to mention, business will be required to demonstrate its ability to meet the loan repayments.
Key attributes of Secured Business Loan:
- Interest cost is generally lower when compared to unsecured loan.
- Some lender may only charge a small margin on top of housing rates
- You may be required to sign Personal Guarantee (PG)
- Lenders are generally flexible with secured business loans
Unsecured Business Loan
Such loan is not backed by any underlying assets or security other than the assets noted in the balance sheet of the business. If the borrower defaults on the loan, the lender may not be able to recover their monies. Therefore, unsecured loans are risky in nature and lender may only lend to the business with strong trading history, good future income streams and strong cash-flow. Amortization term of such loan is quite short and its typically maximum 5 year. A Lender may take Personal Guarantees (PG) from the borrower or from the principals of the business thus, borrowers are also liable for the repayment of the loan under their personal capacity. Needless to mention, businesses will be required to demonstrate its ability to meet the loan repayments.
Key Attributes of Unsecured business loan
- Interest cost is generally higher due to the risk associated
- Lender can be picky on the industry type of the business hence, not every business may be eligible for funding
- Lender can confiscate business assets in an event of default
How Can We Help You Grow Your Business?
Come and discuss with us what is holding you back from growing. Are you worried about having no collateral to offer? Or do you think that your new business may not be eligible for a business loan? We get it. We understand that many small businesses find it hard to get the right amount of funding. However, there’s no reason to hold back! Many lenders are now willing to extend help to small and start-up businesses. Come and talk to us.
