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Thinking that you need a loan for the growth of your business? Before you apply, get familiar with a few common terms which will help you in navigating deals with lenders smoothly and to select the type of loan best suited to your business's requirements and your repayment preference.
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There Are Many Business Terms In The Financial Dictionary, And An Understanding Of These Terms Will Guide You While Making Financial Deals With Lenders.
• Annual Percentage Rate (APR) The Annual Percentage Rate shows all the fees applicable for a loan including the interest rate, processing fees, documentation fee, closing fee, etc.
• Collateral Collateral Is A Personal Or Business Asset That The Borrower Offers To The Lender In Return For The Loan.
•Line of Credit This Funding Option Provides Businesses With Capital That Can Be Used As Required Until The Term Of The Credit Ends.
• Maturity The Maturity Date Of A Loan Is When It Attains Full Maturity By Paying Off The Principal Amount, Interest, And Any Other Fees Associated With It.
• Prepayment Penalty If You Choose To Pay Back Your Loan Ahead Of The Pre-set Loan Term, You Will Have To Pay A Fee Called Prepayment Penalty.
• Cash Flow The Cash Flow Statement Shows The Cash Inflow And Outflow For A Business During A Specific Period. It Is A Good Indicator For Lenders.
• Liabilities Liability Refers To Any Commitment That The Business Has With Another Party And Is Not Completed Or Paid Up.
• Secured Loan A Secured Loan Is A Loan That Is Backed Up With An Asset Or Property Called Collateral.
• Unsecured Loan Unlike A Secured Loan, An Unsecured Loan Does Not Involve Collateral For Security.
Term Loan A Term Loan Is A Specific Amount Of Money Given By A Lender To A Borrower For A Predetermined Interest Rate And Repayment Tenure.
If You Are Unfamiliar With A Specific Terminology Used In A Finance Deal, You Should Clarify The Same With The Lender.
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