A bank loan is the money borrowed from a bank with a specific period of time for repayment and an agreed schedule of repayment. The amount of repayment will really depend on the duration and the size of the amount of loan and also the interest rate.
What are loans suitable for?
In most cases, loans are suitable for:
- Making payment of assets such as computers and vehicles.
- Capital for start-up.
- Times when the total amount of the money you want will not change.
The prices and the terms of loans always vary depending on the providers. They reflect the cost and the amount of risk to that bank that is giving the finance. The terms and pricing can be negotiable for larger amounts of money.
Banks always give loans to businesses with an expectation of good returns from them. They have to first think of the administrative costs and the risk of loan defaults. If a person has a very good relationship with the bank, then it will be better because they will be having a good idea of the person’s business. Therefore, it will allow them to know how to advise the person about the most valuable product for the person’s financial needs. There are different kinds of bank loan which include:
- Fixed asset loan is a loan used to buy asset and the asset is used as collateral.
- Working capital loan is a loan for a short notice or an emergency situation.
- Factoring loan is a loan which is based on the amount of money owed by the customers to your business.
- Hire purchase loan is used for long-term buying of assets like machinery and vehicles.
What are the advantages?
- Unless a person breaches the loan terms and conditions, it is not repaid on demand. It is available for the loan term mostly about three up to ten years.
- A loan may be fixed to a lifetime of the property or any other assets that you borrow the funds to make payments for.
- You can negotiate the repayment holiday on the start of the loan term. This means that you will only make an interest payment for a specific time period while the repayments on capital stay frozen.
- As you have to pay a loan interest, you don’t need to provide the bank with some percentage of the profits or any share in the company you own.
- Interest rates can be fixed on the loan term. You have to understand the amount of the repayments of the loan life throughout.
- The arrangement fee paid on a start of a bank loan may be needed though it is not throughout the life of the loan. Yearly renewal fee can be required on an on-demand bank loan.
African bank loans have really helped many people in boosting their business and acquiring of new assets. A loan can be very useful to you when you know how to use it and the way to repay it back to the bank.