Types Of Business Loans : An Article On A Business And The Best Type Of Loan

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Recommend Article Article Comments Print Article Share this article on Facebook Share this article on Twitter Share this article on Google+ Share this article on Linkedin Share this article on StumbleUpon Share this article on Delicious Share this article on Digg Share this article on Reddit Share this article on Pinterest When it comes to the different types of business loans available in the marketplace, owners and entrepreneurs can be forgiven if they sometimes get a little confused. Borrowing money for your company isn 't as simple as just walking into a bank and saying you need a small business loan. What will be the purpose of the loan? How and when will the loan be repaid? And what kind of collateral can be pledged to support…show more content…
And the raising of venture capital or mezzanine financing can be time-consuming and expensive. Also, both of these options involve giving up equity in your company and perhaps even a controlling interest. Sometimes this equity can be substantial, which can end up being very costly in the long run. Asset-based lending (or ABL), however, is often an attractive financing alternative for companies that don 't qualify for a traditional bank loan or line of credit. To understand why, you need to understand the main differences between bank loans and ABL - their different structures and the different ways banks and asset-based lenders look at business lending. Cash Flow vs. Balance Sheet Lending Banks lend money based on cash flow, looking primarily at a business ' income statement to determine if it can generate sufficient cash flow in the future to service the debt. In this way, banks lend primarily based on what a business has done financially in the past, using this to gauge what it can realistically be expected to do in the future. It 's what we call "looking in the rearview mirror." In contrast, commercial finance asset-based lenders look at a business ' balance sheet and assets - primarily, its accounts receivable and inventory. They lend money based on the liquidity of the inventory and quality of the receivables, carefully

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