Small Business Finance is meant for small businesses and can be procured in the two standard ways, secured and unsecured loans. To avail secured small business finance the loan seeker would have to place one of his properties as collateral against the loan amount. However in case of unsecured small business finance no such collateral is needed, but the interest rate is higher when compared to secured small business finance apart from a shorter repayment duration. People suffering from bad credit history can also avail small business finance.
The need for small business finance is felt very strongly by new entrepreneurs who are normally short of cash. Most of the time this is the case with every business at an early stage and that is when long lasting relations develop between growing businesses in need of a steady supply of credit and the credit supplier in the form of banks and financial institutions.
However it must be admitted that for banks and financial institutions providing finance to small businesses it is sometimes difficult to assess the creditworthiness of certain borrowers. This is because at an early stage most businesses tend to be fundamentally weak although the degree of weakness may vary. Under such circumstances the lenders often try and assess the growth potential of the borrowers and they do it in many ways, mainly by considering the market segment, the geographical location and credit rating of the borrowers.
Last Updated on : 1st August 2013