Business loans encompass a variety of borrowing potentials for companies, whether they work in a digital environment or a physical one. The most common types of loans will cater to a range of needs, such as:
- Borrowing cash to purchase a transportation/ utility vehicle
- Receiving a sum to be put toward the purchase of office equipment
- Applying for a loan to help with outstanding debts
The above three examples are only a few of the options that company loans can be used for and each will dictate their own specific set of terms and conditions. Many borrowers are often tasked with finding out about these T&Cs themselves and that’s why we’ve compiled a short list of some of the most popular policies, as defined by lenders.
Mortgages typically feature interest rates, but other loans will propose APR (annual percentage rates) instead. Rather than calculating rates on a monthly basis, a lender offering business loan options will instead define an APR and then split this amount over the course of a year – making it quite simple to keep on top of what’s owed annually.
Most banks will require proof of credit history from the potential borrower and this will often define the type of repayment structure that a company can expect to be faced with. Some lenders will require weekly repayments, others might suggest fortnightly alternatives, but the majority will be happy to offer monthly payment plans. Whatever the sum borrowed, it will be broken down into a range of payments that will cover the duration of the entire schedule.
Failure to pay protocols
Although it isn’t possible to determine what every lender will do if they don’t receive their payments when they are due – it is fairly safe to assume that they will consider repossessions as a last resort. In the majority of instances a bank will allow their borrower time to negotiate new terms, or extend a leniency period if cash simply isn’t available, but if the borrowed amount isn’t paid for eventually, most banks will consider seizing goods and assets in an attempt to recoup their losses.
Terms that affect credit scores
If a borrower isn’t able to pay back what they owe and they also don’t possess the assets to cover the sum that they received, then a bank will often have no other choice than to accept its losses. Even if the borrower is able to pay back what they owe eventually, then the damage that this can cause to a credit score can be quite substantial. Most lenders will place a permanent marker against the borrower’s name (or the name of their business) and this can drastically affect their potential to borrow more money in the future, from any lending institute.
There are several other terms associated with the lending and borrowing of cash from a bank and these will usually be defined in paper form so as to avoid any confusion throughout the duration of the contractual agreement. Fortunately, the Australian government has issued legislation that demands that all lenders are as transparent as possible regarding their conditions, and this can be of huge benefit to applicants hoping to apply for a business loan.