What Are Common Small Business Loan Terms?

As a business owner, you may find yourself in a situation where you need to borrow money from financial institutions. In such circumstances, you must be prepared and knowledgeable about various business loan terms. Knowing some common business terms will help you stay ahead of the curve in dealing with your business's financial health and stability.

This article explains five commonly used business loan terms you need to know.

1. Working Capital

This amount is the money a company has at its disposal minus the debt it owes.

If profits are declining and business is poor, the amount of working capital a company has to operate with may not be sufficient to sustain its daily operations. When the business is financially stable, applying for a working capital loan guarantees that the loan will be approved. Setting aside your money and growing it is the best way to prepare for the future.

Be proactive if you need to make changes to your business. Apply for a working capital loan before you need it to ensure you have the funds when you need them the most.

2. Accounts Payable

It is the amount you have borrowed and owe to your lender. Accounts receivable is the money owed to you. It includes goodwill to other businesses and customers who buy from you regularly. You must monitor both accounts to get an accurate picture of the financial health of your business.

3. Blanket Lien

A blanket lien gives the lender the right to seize some or all of the company's property, not just the collateral if you default on your payments. In most cases, only collateral is forfeited. Lenders may confiscate other property to make up the difference if the security loses value or does not retain its value.

4. Cash Flow Statement

A financial statement that provides information about the income and expenses for a specific period is the cash flow statement. The statement shows recent fluctuations in your financial situation and is often prepared monthly and used to adjust your overall budget.

5. Line Of Credit

A line of credit is a type of business finance that works like a credit card. Entrepreneurs are granted a line of credit up to a specific limit. You need to repay the amount you borrowed.

Apply For Business Loans With IIFL Finance

IIFL Finance is a leading instant business loan provider. We provide quick loans for small businesses with small financial requirements up to INR 30 lakh. You can check the interest rate at your nearest IIFL Finance branch or online.

The entire process, from application to disbursement, is 100% online. Apply for an IIFL Finance business loan today!

Frequently Asked Questions

Q.1: What do you mean by a subprime borrower?
Ans: A subprime borrower is a higher-risk company. Borrowers with good credit and financial health have no problem borrowing the working capital they need. Subprime borrowers may face financial hardship due to business slowdowns or closures due to illness or other events. They pose a higher risk, but that doesn't mean they can't get credit. It just means their standards and requirements differ from those with exceptional credit.