How Do Business Loans Work? - National Business Capital


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How Do Business Loans Work?

Starting a small business is an exhilarating experience. Indeed, running their own company is the culmination of a lifetime ambition for many first-time business owners. However, operating a new business also requires a great deal of application and hard work. After all, there’s so much more to creating a successful business than opening the doors and turning on a set of neon lights. And one of the most important things to understand about starting a small business is how to finance it. To that end, today we’re going to start with the basics and answer a classic question: how do business loans work?

Anatomy of a Loan

Simply put, a typical small business loan functions similarly to a personal loan you might take out on a house or car payment. Essentially, a loanee (business owner) approaches a lender and requests for a sum of capital to make payments, complete a project, settle a debt, etc. From there, a lender can either accept or deny a loan application based on the applicant’s prior credit (both business and personal), the nature of their industry, and the effectiveness of their business model. At the end of the process, lenders assign an interest rate to the loan so they can make a profit from the loan repayments. In addition, a lender may also require the loanee to supply collateral in case the loanee defaults on their payments.

What to Look for in a Business Loan

To understand the value of a business loan, you need to consider it in context and on its own terms. But in general, it’s best to try and secure loans with low interest rates and that allow for repayment over a long period of time. Makes sense right? That’s why SBA loans are such valuable commodities. The US government subsidizes SBA loans –– so lenders who are approved to give out SBA loans are guaranteed a portion of their money back, even if the loanee fails to make payments. However, sometimes the most valuable aspect of a small business loan is the speed at which you can use it. For instances when your business needs capital quick, note that there are fast business loans available within 24 hours of application.

Varieties of Business Loans

Business loans are as diverse as companies themselves. For instance: equipment financing is fantastic way for construction companies to get access to necessary machinery to complete a project. And merchant cash advances can help restaurants or other sales-based businesses navigate lean months with low sales. Plus, you can always apply for a business line of credit if you’re looking to increase your cash flow over a short period. The truth is, whatever industry you ply your trade in, there’s likely to be an option that works specifically for you.

Consult a Professional

There’s no need to feel overwhelmed by the number of small business loans available to you. That’s because if you’re unsure about what works best for your company, you can always contact the National Business Capital team. We’ll work to help you secure vital finances –– even if you’ve been rejected by the bank. And for more information on how to land the capital you need without going to the bank, download our free eBook here:

How Do Business Loans Work?

Last Updated on February 27, 2018

National Business Capital helps entrepreneurs secure quick and fair financing to save time and cultivate sustainable growth.

Our stress-free online platform is designed for simplicity and speed, helping business owners go from application to approval in a matter of hours. And while we remain a leader in the Fintech industry, our clients agree it’s our personalized service and award-winning team that sets us apart.

From SBA loans to lines of credit, to equipment financing, and more, business owners can access all the different financing programs available to them in one place. Through our streamlined process, we have helped clients secure $2 billion in financing since 2007, and, more importantly, we’ve helped entrepreneurs save a tremendous amount of time and grow faster.

About the Author, Joe Camberato

Joseph Camberato, CEO of National Business Capital, developed a passion for business at a young age. Joe started his company in 2007 in his spare bedroom and has grown to secure over $1 Billion dollars in financing for small business owners nationwide. National’s team has an amazing culture and has been name the #1 Top Workplace on Long Island 3 years in a row and counting. Joe is a trusted financial expert who’s published more than 2,000 articles in the last 3 years. His articles have generated over 5 million page views and has been featured on blogs such as Google News, Yahoo, CNBC, Forbes Magazine, etc. His passion has also inspired him to build the "GrowByJoe” YouTube channel where he shares his insights into small business trends and tips for growth. Joe also holds a seat on Forbes Finance Council and is an active member of the Young Presidents' Organization (YPO), a global leadership community.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.