Answering some questions on equity loans and business loans
What is the difference between an equity home loan and an equity business loan?
Any equity loan is secured by assets that are owned by you. An equity home loan uses as equity that value of the property that is wholly owned by you to secure the loan. In the case of an equity business slogan, assets that have been acquired by the business for its functioning may be used as equity.
Why do equity loans come with lower rates of interest?
Equity loans are loans or a line of credit that is offered using your property as collateral security. Since such a loan is fully secured, it proves to be less risky for the lender. It is for this reason that banks and other financial companies can offer equity home and business loans for better loan tenure and at the lower rate of interest.
What kind of questions will a lender ask?
This depends on the lender, but according to the SBA, there are in fact some standard questions that one should be prepared for:
- The reasons for applying for a business loan?
- Which department or area of interest would the loan proceeds be applied on?
- Nature of capital expenses – buying assets or incurring substantial costs should be disclosed along with the supplier details
- What other debts relating to business does the business have and who are the creditors?
- A detailed profile of the Management personnel (team).
What kind of questions should the business be prepared for, when they meet the potential lender?
- The requirements of the potential lender must be asked in detail – especially the aspects relating to paper work. It is quite known that paper work takes away most of the time and it would be prudent to equip the business with it.
- Will the potential lender be prepared to address the business needs? Do they believe in the business
- How flexible are they regarding offering certain leverage on repayment terms, interest rates, prepayment penalty, etc.,
- The terms of the business loan by itself should be as clear as water with no ambiguities. Risks associated with the business loan should also be studied in detail.