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Benefits of Business Lending
Business lending involves banks issuing money in terms of loans to business at an interest one the business has shown that it is able to pay back the money. Since business are capable of repaying the loans on time, financial institutions prefer lending to them than to individuals. Issuance of loans does not mean the bank takes ownership of the business but it does gain in terms of interest that is paid by the business. Both businesses and banks benefit from business lending. The interest charged is set by the central bank for all financial institutions as a percentage of the amount loaned and the duration the loan will take to be repaid. The businesses are able to get loans such as fixed assets,hire purchase, working capital and factoring loans from the banks. This paper will articulate the importance of business lending.
Business loans are beneficial to the businesses as they use the money to start the business. Businesses require money to start operating. This money could be gotten from various places. Bank loan is one of the ways to get financing. This is good since the business will get cash from the loan since it may not have enough itself to start running.
A business may use the money from the bank to grow itself. After setting up a business there is need for more money to grow. 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 want to purchase expensive equipment or asset for the business. Fixed asset loan will be issued by the bank to the business to finance this purchase. The asset will guarantee itself on the loan. This will benefit the organization as it will be able to purchase assets that on its own would not have afforded. This assets are useful for the business in its day today operation.
The business is well aware of the amount of interest payable on a monthly basis. This is due to the bank giving a fixed term repayment period for the loan. The business is able to plan how it will repay the loan.
Business lending is good because the repayment period is calculated depending on the amount loaned. The business does not need to repay back the loan all at once. A duration of time is agreed upon during which monthly installments are made. The business and the bank agree on the repayment period that could range from one to ten years.

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