Web definition for a bank loan is a medium-term form of finance
obtained from a commercial bank or other similar financial
institution. The loan may be secured on the entity’s assets and
the interest charged may be variable.
A loan from a bank can be of different types. A loan to buy
consumer durable goods, such as, a car or furniture is a personal
loan but also called a bank loan.
A mortgage from a bank is similarly called a bank loan. Basically
any borrowing from a bank which is not of a short term nature can
be known as a bank loan.
Getting bank loans
can be a tedious, but if you do some quick
homework the process becomes much easier – and you can save money
Getting a Bank Loan
Bankers usually look at what are called the three `c's`:
character, credit and collateral (a security pledged for the
repayment of a loan). Character means more than not having a
criminal record. The banker should feel confident that you are not
going to suddenly disappear to some unknown place if the business
runs into trouble. Specifically bankers like to see ties to the
community such as long residence, family ties, and home ownership.
A person taking a loan should have clean credit history. A couple
of late credit card payments doesn’t matter much, but if a person
is missing mortgage payments for three months in a row will
require a good explanation. Bankers like, good character and good
credit, but they live for solid collateral. (Equipment, buildings
and trucks--that's the kind of stuff that bankers really like for
collateral--) even if the business goes bust these solid value are
likely to be worth a lot. Inventory, raw material and goods are
second choices for collateral--they will lose their value more
quickly than fixed assets but still be worth something.
Banks usually consider the interest rate, usually described as the
Annual Percentage Rate or APR. if you're borrowing a lot of money
over a long period The differences can be dramatic . The
difference between 7% and 10% doesn't look like much on paper, but
it's likely to make a difference of several hundred pounds to your
Fixed APRs are a good idea, especially at the moment when the
economy's worn out. With a fixed APR if the interest rate rises,
your payments won't. You can often get bank loans with very low
variable APRs but you're taking a big gamble if interest rates
Some bank loans
charge a penalty fee if you repay them early,
while others don't. You can skip three consecutive payments if
times are hard; it's worth having because you don't know what's
round the corner. Some firms also let you vary your payments, so
you can pay more when you're loaded and less when you're broke.
Prior approaching to bank, you should have all of your key
documents in order, starting with a solid business plan. You will
also need to have the most recent financial statements available,
projections for the business (this is typically in the business
plan) and a repayment plan, plus collateral.
Collateral may include:
• Hard goods such as equipment
• Real estate
• Stocks or bonds
• other personal assets
• Personal guarantees