Loan Types for Business Owners
01/25/12
Loan maturities are based on the ability to repay, the purpose of the loan proceeds, and the useful life of the assets financed. The maximum loan maturities have been established to: twenty-five years for real estate, up to ten years for equipment (depending on the useful life of the equipment), and generally up to seven years for working capital. Short-term loans are also available to help small retail businesses meet their short-term and cyclical working capital needs.
Here are several types of loans available for your small business:
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Advantages |
Disadvantages |
Financing Types
Traditional
Banks |
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Stability
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Array of financial services
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Many to choose from
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Competitive pricing
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Lack of retail industry experience or focus
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Often slow to respond; impersonal
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Less interested in smaller transactions
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Generally available only to profitable companies
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Private Equity Funds |
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Provide "hands on" value/added expertise
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Generally well-capitalized
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May provide access to industry and management expertise
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Provide "hands on" value/added expertise (Yes, it's the good news/bad news thing!)
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Strict investment criteria
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Equity ownership required
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Required returns often 25% +
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Require track record of a proven concept
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Asset-Based Lenders |
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Nontraditional transactions
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Fewer financial covenants
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Industry focused
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Rigid documentation standards
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Higher transaction costs
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Onerous reporting
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Traditionally perceived as lending only to troubled companies
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