Types of Business Loan – Business Loan Definitions

 

In this research of this report am trying to find the different loan options that available to small and medium businesses from banks or other financial institutions.

The research it will open the window on the different terms of loans i.e. short term, medium term and long term and it is up to the businesses to decide which is the most affective for the business.

Also In this research will going to look at the loan types with details, the eligibility requirement and the application process for each with supporting information and documents will be provided for each loan.

A loan can be defined as

“An amount of money that is borrowed, often from a bank and it has to be paid back with an interest.” (Press, 2017)

There is two main forms in this research:

The banks were visited and the online web researches.

1. Bank of Ireland, AIB and Credit Union which were visited to collect some leaflet relating to the types of loan research.
2. Online Web searches related to the subject within Republic of Ireland.

Businesses loans are a sort of finance and are classified as a short term, Medium term, and long term. In this research will give some examples of uses for each loan type.

Short term

Money that is lent for a short time, usually less than one year. Short term loans assist businesses that their businesses is seasoned like retail businesses and businesses who like to build up inventory.

Short terms are to raise working capital to cover temporary deficiencies in funds so you can meet your expenses.

Medium Term

 A loan that must be paid back between two t ten years after the money is borrowed

Term Loan usually designed to finance the purchase of fixed assets. It is also a method of paying for equipment in instalments.

Long term

A loan that is to be paid back over a period of time between three and ten years and sometimes for as long as twenty years.

Term Long loan is usually for investments .Loan instalment and mortgage payments made with 12 month count as current liability and the outstanding debt or mortgage beyond 12 months is long-term liability.

 

Bank overdraft are a short term financial institution allowing businesses to issue cheques or make withdrawals on their current account, up to a specified amount.

Interest is charged on daily basis on the amount of the overdraft used. Mostly, overdrafts are used by a business in managing its working Capital.

Eligibility

• Flexible repayment
• Business loans tailored to your cash flow.
• Borrow up to 100.000 per annum.

Application Process

• Applying could be online by completing an application form available.
• later will be a meeting from the bank with a loan-adviser to discuss your business requirement and if there
• Also you will required to with any other additional documentation in order to process your request.
• You can apply over the phone
• Business loans eligible for Business customers who are based in the Republic of Ireland and over 18’s.

 

This type of finance used to fund a wide range of moveable businesses and equipment, from machinery to transport vehicles.

The bank buys the asset and leases it to the businesses by lease agreement that gives the business the use of assets for a time (3-5) years, in return for payment monthly to the bank.

At the end of the lease by paying an annual rental to the bank, it can trade the asset in, or the asset may be bought outright.

2 types of business plan with the interest rate, Tax deductible and Vat reclaim. Offered by A I B.

Eligibility

• Minimum advance €30.000 – Maximum €150.000.
• Minimum term 10 years, Maximum term 15 years.
• Security required loan must secured by first charge on appropriate legal instrument.
• Loan Insurance is mandatory and is paid by member s.
• 6.50% current variable rate, Annual by 6.7%.

Application Process

• Arrange a meeting with your at the department of loans manager.
• Complete the Application form in full.
• Gather any additional supporting documents or information that maybe required by the bank. And will be informed by the bank if any additional requirements wanted.
• Business loans eligible for Business customers who are based in the Republic of Ireland and over 18’s.

Although there are many types of loans available for businesses requirements and they are available and facilitated by the financial institutions. The conclusion is that businesses should be aware of what type of businesses is affordable depending on the capacity of business.

Those financial institutions or the banks will be required to advance loans after center conditions set out in the agreement have been satisfied.

Repayment of loans depends on sources that can generate cash during in a single operation cycle.

Finally, the most important consideration, however the ability of the businesses to repay the amount of loans.

 References

Allied Irish Bank PLC. (2017, January 20). Business.aib.ie. Retrieved from https://business.aib.ie/products/finance-and-loans/asset-finance

Bank of Ireland. (2017, January 20). Buisness Loans – Loans – Bank of Ireland. Retrieved from https://businessbanking.bankofireland.com/credit/business-loans/small-business-loan/features-and-benefits/

Bank of Ireland. (2017, January 20). Small Business Loan Application – Bank of Ireland Forms. Retrieved from https://form.bankofireland.com/small-business-loan-application/?facility=Loan

Class Handout and Booklet. (n.d.).

Douglas, A. (2003). Business Administration. Dublin: Gill & Macmillian.

Press, C. U. (2017, January 19). dictionary.cambridge.org. Retrieved from dictionary.cambridge.org: http://dictionary.cambridge.org/us/dictionary/english/loan