Types of Business Loans


Secured Business Loans: In secured Business loans, the borrower promises his assets as collateral against the Business loan. In return, the creditor grants the loan. The assets he or she pledges then become a 'secured loan' or In case of a default, the creditor gets the possession of the collateral. As a result, the creditor can recover or regain the amount of the money loaned by selling the collateral.

Unsecured Business Loans: Unsecured Business loans are the exact opposite of secured ones. It is a kind of a loan or debt, which is not supported by collateral. It is difficult to get an unsecured Business loan; however, it is cheaper at the same time. Here, the credit rating of the business matters. It is basically an assessment of the repayment capabilities of the business. 

Professional Loans: Professional loans, as their very name suggests, are provided to self employed professionals like Doctor, Chartered Accountant, Interior Decorator, Architect, Company Secretary, etc. Unsecured in nature, this type of loan is not given to manufacturing, trading or processing units. The amount of loan varies between Rs. 25000 to Rs. 25 lakh, considering the age of the applicant, his financial standing, his repayment capacity, tenure of the loan (maximum 5 years), etc. 


Trade Loans: Trade loans are provided to traders/ businessmen, so as to help them either open a new business or operate/expand an existing one. The amount of loan varies between Rs. 25000 to Rs. 100 lakh, considering the age of the customer, his financial standing, his repayment capacity, tenure of the loan, etc. 


Short-term Business Loans: Used for short-term working capital requirements and paid within 1 year. 


Intermediate Business Loans: Used for new business, to build inventory, buy equipment or increase working capital, and paid between 1 and 3 years. 


Long-term Business LoansUsed for well established business, to increase fixed assets, for related business acquisitions or expansion, and paid between 3 and 5 years. At times, used for start-up business, to purchase land or buildings, fund construction efforts or finance long-term working capital.