Released on: March 24, 2008, 4:31 am

Press Release Author: For More Free Resources visit www.greatindustrialguide.com

Industry: Management

Press Release Summary: Are you thinking about starting a business but have no money
to do it with? Well, you\'re not alone. This article will tell you the basics of
borrowing money.

Press Release Body: Are you thinking about starting a business but have no money to
do it with? Well, you\'re not alone. This article will tell you the basics of
borrowing money.
A loan is money that is borrowed, and has to be paid back along with interest. If
the money is borrowed from an institution such as a bank, this is called a
commercial loan. Money that is borrowed from a friend or a relative is called a
personal loan.
The borrower, or debtor, is the business or individual that takes out the loan. The
lender, or creditor, is the source from which the money was borrowed. The term, or
period, is the time that is specified during which the borrower has to use the money
borrowed before he has to repay the loan. The maturity of a loan is when a loan term
reaches its end. The Principal is the amount that is borrowed from the lender. When
you or your business borrows money, the lender wants to know when they will get
their money back. Keep this in mind when you are looking for a lending source.
If the business is not able to repay the loan, the lending source has a right to
legally come after assets to recoup its money. The extent to which you are
personally liable depends on the business structure your business is operating
under.
If you are approved for a loan, that you will have to make scheduled payments
(typically on monthly basis) plus interest. A loan can sometimes be set up as a
balloon loan. A balloon loan will typically require smaller initial payments and one
lump sum of what was borrowed as the final payment at the end of the term.
Borrowing from Institutions
Business loans generally fall into two main categories: short term and long term
loans. A short term loan is a loan that is to be payed back within one year.
Examples of short term loans include:
Working capital loans
Accounts receivable loans
Lines of credit
Long term loans are loans that are to be payed back typically from one to seven
years. Long term loans are typically used for:
an expansion of a business
the purchase of equipment
real estate
Most business loans that are used for starting a business are long term loans.

When you approach an institution for a business loan, it will be looking at you as
the business owner as closely as it will be looking at the business itself. One of
the ways lending institutions make money is by lending money and they want to be as
sure as possible that they get back their money with the interest owed.

The time between applying for a loan and learning that you have been approved (or
disapproved) can vary. If you are disapproved, you may be told almost instantly. If
you are approved, it may take a few days though it usually takes longer. It may even
take several months to learn whether you or your business has being approved for the
loan.
Borrowing from Family and Friends
If you don\'t want to, or can\'t get a commercial loan, you can consider getting a
private loan from family or friends. This is usually real informal. However, you
need to be careful because this can lead to ruined relationships.
If you are getting a private loan, it is in the best interest of the lender to have
an agreement put in writing. The written agreement should state the principal, the
interest charged and the terms of repayment. This puts the lender in better position
either write off the loan on his or her tax return or to legally come after you.
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