Blogging On Finance

What Is a Startup Business Loan?  A company may need to have been in operation for at least one year before it is eligible for certain types of business funding. In the case of new businesses in need of funding sooner, a startup business loan could be a good option. A startup business loan is a form of financing made available to businesses with no or little business credit history. It is common for startups to obtain funding through term loans or Small Business Administration (SBA) loans, but they may also consider business credit cards or asset-based financing. Startup owners can also utilize less traditional financing methods like crowdfunding to access the working capital they need to launch and grow their businesses.   Why are startup loans for new businesses important? Starting a business consumes many resources. In addition to finding a market fit, hiring the right team, and ensuring your product is market-ready, you will need to find ways to cover your costs. This can be somewh

There are generally two types of consumer loans available: secured and unsecured. The primary difference between the two is the presence or absence of collateral , which backs the debt and serves as a form of security to the lender against non-repayment.   What Are Secured Loans? Secured loans refer to those in which the borrower pledges an asset as collateral or security for the loan. A secure debt instrument means that the lender can sell the asset to recoup the funds advanced to the borrower in the event of default. The most common type of secured loan is a mortgage, in which the collateral is the mortgaged property. When a borrower takes out a mortgage, the property is used as collateral to secure the loan; the lender maintains an equitable interest in the property until the borrower repays the loan in full. If the borrower fails to make payments, the lender may repossess the property and sell it to recoup the funds owed. Likewise, if a borrower fails to make timely payments on a c

What Is a Recourse Loan? In recourse loans, the borrower is 100% personally liable for the loan amount. This could result in a lender repossessing or foreclosing the collateral stipulated in the loan agreement. If the lender cannot recoup the entire loan balance from the sale of the collateral, it may file a lawsuit and pursue the borrower’s other assets.  Some common types of recourse loans include: ✔ Personal loans ✔ Credit cards ✔ Auto loans ✔ Short-term real estate loans. Recourse Loan Example: If a borrower takes out a $25,000 auto loan to purchase a $32,000 vehicle, the loan will be secured by the car. Should the borrower, after several payments, default on the loan with $20,000 remaining, the lender may repossess the vehicle and sell it to recoup the outstanding loan amount. However, let us suppose that the car has depreciated and can only be sold for $18,000. In such a case, the lender may also seek a judgment from a court and garnish the borrower’s wages to recover the remain