If you are a new entrepreneur and you have decided to ask for a Small Business Loan, the first step is to think about what kind of loan is more convenient for you and its length. You have two main choices: Lines of Credit and Loans. The latter are categorized on the basis of their length of action: short term or long term.

In order to request a Small Business Loan, it is crucial to have an elaborate list of what the loan will be invested on before bringing it to a financial institution. The duration of the loan and the activity that will allow your small business to make your payments.

Short Term Business Loans are usually paid from the operative activities of the company. In short, these loans are paid from sales of assets. Long Term Loans are a bit different, because they are mainly paid from the earnings the company receives a the end of a previously established period.

Credit Line: A line of credit is an arrangement in which the bank disburses the funds when needed, up to a predetermined limit (usually one year).

Term Loans: A term loan is an agreement that provides a total amount of money at the beginning of the loan. The loan is paid in equal amounts over an agreed number of years.

Short Term Loans usually have a duration of one year. These types of Small Business Loans are used by companies to add more liquidity to their financial statements either to buy inventory or to finance their accounts receivables. The lending bank anticipates to start receiving payments on the loan after the company starts selling their products, or collection the money owed by the customer, or when the inventory is sold.

Small Business Loans that are for a period greater than one year are called, Long Term Loans. Generally, companies resort to this kinds of loans in order to increase their efficiency and reduce their operative costs. These types of loans usually result in the purchase of machinery that allow faster and efficient production or the improvements of the company’s facilities.

Wade Henderson – very Professional – 15 yrs in the Business Finance Field – reputation for getting the deal done. IMMFinancial.com Commercial Line of Credit Small Business Financing