Commercial Banking Lawyers
Securing a Commercial Loan for your Business
There are a number of ways to secure a commercial loan whether your business needs money to startup or to expand. This includes bank financing, terms loans, lines of credit, revolving lines of credit, securities, and venture capital, all described below.
Bank Financing is a traditional loan. The bank gives the business an amount of money and the business promises to pay it back over time. Usually the business must offer some type of collateral to secure the loan, such as:
- Real Estate
- Accounts Payable
A bank may also ask private business owners to personally guarantee repayment of the loan by signing promissory notes.
Term Loans are loans that are repaid in equal periodic installments, such as every month or year. These installments include both the principal and interest accrued. Some term loans do not have installments at all; instead the full amount (principal plus interest) is paid at the end of a specified period of time (i.e. five years).
Line of Credit
A Line of Credit is a non-binding commitment by a bank to occasionally loan money to a company as it needs it. Usually that money must be repaid within a specified period of time. Since this commitment is non-binding the bank can cut off credit whenever it wishes.
Revolving Line of Credit
A Revolving Line of Credit is very similar to a Line of Credit.
The two main differences are that:
- The loan agreement is formally written down, and
- The bank is obligated to extend credit to the business; it cannot cut off loans unless the loan agreement allows it.
Most revolving lines of credits have a maximum loan amount, or credit limit. Revolving lines of credits are very similar to consumer credit cards.
To raise money a company can sell Securities. A Security is an interest in the company that is bought and paid for by an individual or company. When a company sells securities it's either selling a percentage of the company or the right to a percentage of the company's profits. The company can then use the money raised from selling securities however it wishes.
Some forms of securities are:
- Investment Contracts
Venture Capitalists are firms that invest money in companies that they hope will be profitable in the future. A venture capital firm will give money to a business in exchange for ownership of a substantial part of the company.
Seeking venture capital is similar to a securities offering in that the company is trading some of its equity for money. The two differ, however, in that venture capitalists work more directly with the company and have some control over the business' operations.
Do I Need an Attorney to Help Me Finance My Business?
Even when you have picked a form of financing, getting the money can be complex and frustrating. An attorney can help you decide which method of financing is best for your firm. Additionally, a lawyer can oversee all the paperwork necessary to get the money your firm needs, and resolve any disputes that may arise.
Consult a Lawyer - Present Your Case Now!
Last Modified: 05-26-2009 03:12 PM PDT
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