Business Development Loan
As the term suggests too, business development loans are provided for the development of business and commercial activities. Businesses are seen as an important pillar of economy and provide employment opportunities. Thus, for any nation to develop, businesses have to play a very important role. Keeping this in mind, governments across the globe have come out with different types of business development loans that are provided by the government as well as private institutions. Even special government departments have been carved out for the purpose of development of businesses.
For example, in United States, SBA or Small Business Administration looks after different types of business development loans provided to small business enterprises and ensures smooth passage of money. There is also a Small Business Development Loan Program that aims at creating jobs. It provides loans for the purpose of business start ups and expansions. Many types of business units are eligible for getting the business development loans. For example, manufacturing units, industrial units etc. Terms and conditions attached with business development loans vary from one lender to another.
For example, under the Small Business Development Loan Program, it is required that 20% of the cost of project is privately financed by means of equity or other resources. Maximum loan amount provided is $5 million. As far as interest rate is concerned, it remains fixed for the entire loan period in most of cases. Real estate loans are also provided as business development loans for a period of 20 years. Similarly, equipment loans are provided for a period of 10 years. In United States, SBA has played a significant role in providing business development loans and development of businesses. Its innovative and continuous approach has helped many businesses in fulfilling their financial requirements and in expansion of business activities.
Business development loans are mostly provided as secured loans and in most of cases, it is the first mortgage on the real estate or equipment. In Canada, small business development loans are provided by the Business Development Bank of Canada. This financial institution is completely owned by the Canadian government. Businesses involved in the technology and export sector are given preference over other business units. Canada Small Business Financing Program aims at increasing the availability of loans as well as leases to the expanding small businesses. Businesses can apply to participating lending institutions and if loan is granted, government guarantees the 85% of the loan amount in case of default. Small business starting up or having operations in Canada are eligible for this program.
All types of entities like incorporated companies, proprietorship and partnership first etc are eligible to apply. However, religious enterprises, farming firms and charitable institutions are not eligible for the business development loans. As far as other commercial loans are concerned, these are provided for getting finance up to 90% of the cost of purchase and improvement of physical assets. These are also provided for the purchase of new and used equipment. Under the above financing program, financing of capital leases is also done. Finance is provided with respect to used and new equipment that includes hotels, restaurants, vehicles etc. Maximum loan amount provided under the program is $250000. As far as interest rates are concerned, these are either floating or fixed. However, floating rates are not more than 3% higher than the prime lending rate of the lender. Similarly, fixed interest rates cannot be more that 3% higher than the residential mortgage rate of the lender. Small businesses in Canada that are not able to access the bank credit are offered with micro credit facilities. Loan amount under this facility is lower than $25000. Apart from above, there are many other provincial programs available that meet the needs of local communities.
Business development loans are popular in United Kingdom also. There are many types of financial institutions offering these loans. For example, Alliance and Leicester is one such institution. It offers various types of business loans. For example, business loans less than 25000 pound sterling are offered to entities for fulfilling financial requirements in a cost effective manner. Fixed repayments are offered for the entire loan period and interest rates are quite competitive. Minimum loan amount is 3000 pound sterling and repayment period varies from 1-5 years. Similarly, business development loans more than 25000 pound sterling are also offered.
These loans are provided for supporting the start up businesses and are approved in fast manner. Repayment holidays are also available. Repayment is made through interest and capital installments on monthly, quarterly and annual rests. Interest rates are linked to liBOR or Alliance and Leicester bank base rate. These loans are offered for a maximum period of 20 years and minimum and maximum loan amounts are 25000 pound sterling and 100000 pound sterling respectively. Interest rates are applied as fixed as well as variable rates.
Similarly, Lloyds TSB is another source offering business development loans in United Kingdom. Minimum amount that can be borrowed is 1000 pound sterling and capital repayment holidays are available. Interest rates are fixed or linked to base rate. Maximum loan term allowed is 30 years. Optional loan protection is also available that helps businessperson in covering payments in cases like accident, death etc. It can be contacted at 0800 156 0048 for getting more information.
For loan amounts lower than 100000 pound sterling, repayment period varies from 1-10 years and there are no capital repayment periods allowed. In case of business development loans more than 100000 pound sterling, maximum repayment period allowed is 30 years. Apart from above, base rate linked business development loans are also available. These are offered at variable interest rates, which fluctuate as per base rate. Maximum amount provided in these loans is $500000 and loan repayment period varies from one to twenty years. Capital repayment holiday can also be applied that covers first two years. There is no early repayment charge in this type of loan.
