by rolex--replica
Business lending involves banks or financial institutions offering loans to businesses once they ascertain their capability to pay back the loan at an interest. Since business are capable of repaying the loans on time, financial institutions prefer lending to them than to individuals. Banks gain through interest charged but they do not claim ownership of the business once the loan is given. Business lending is of benefit to both bank sand businesses. Central bank sets the percentage that is supposed to be charged as interest by the financial institutions depending o the time the loan will take to be cleared. Hire purchase , fixed assets,factoring and working capital loans are some of the loans offered by the banks. This paper will articulate the importance of business lending.
Business loans are good for business as they use the money as capital for the business. Money is required by the business to start its operations. This money maybe come from various avenues . Bank loan is one of the ways to get financing. This is good since a business might not have enough money to finance itself and the bank loan will help the business start operations.
A business may use the money from the bank to grow itself. A business will need more cash for growth after it has already been set up. The bank may need to finance the business on its growth venture since the business may not be in a position to finance its own growth. In order for a business to avoid stagnating it is important to keep growing. The business experienced more productivity of its products and services as a result of continued growth which is beneficial to its clients and other stake holders.
A business may have a need to acquire an expensive asset to be used in the business. Fixed asset loan will be issued by the bank to the business to finance this purchase. The asset being bought will act as collateral for the loan. The business is at an advantage since it can now be able to purchase the asset it could not afford on its own. This equipment will be used in the day today running of the organization.
The business is able to know how much interest it is supposed to pay monthly. This is due to the bank offering a fixed term period of repaying the loan. This is good for planning purposes as the business is able to organize itself for repayment.
The amount loaned is used to determine the loan repayment period. The business does not need to repay back the loan all at once. Monthly repayment period is agreed by the bank and the business and it involves a certain duration of time. Repayment period ranges from one to ten years depending on the agreement.
