A business loan is a financial instrument that provides funds to a company for expansion of its operations. A business loan can be used for purchasing assets like machinery, land, building etc. It may also be used for paying off existing debts.
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Business loans are financial instruments that give businesses access to funds from banks and other lenders at affordable rates. Businesses can use these loans for various purposes including expanding their operations, buying new equipment, purchasing raw materials, paying salaries and other expenses. A business loan should not be seen only as a way to finance your business but rather as a tool to help you achieve your goals and manage your business better.
- Interest Rate
Interest rate is defined as the amount of money that a lender charges a borrower for borrowing money. This is usually expressed as a percentage of the principal sum borrowed. A higher interest rate means the bank makes more money off your loan, while a lower rate means they are losing money. There are many variables that influence the interest rates of different lenders, but generally speaking, the longer the term of the loan, the higher the interest rate charged.
Term refers to the length of time you have taken out the loan. This can range from 1 month to 30 years. The longer the term, the higher the interest paid over the duration of the loan. If you borrow $1000 for 6 months, you pay back $1666.33 (1000 x.08). However, if you borrow the same amount for 60 months, you would pay back $2628.59 ($1000 x.0625)
- Annual Percentage Rate (APR)
The APR is the annualized cost of borrowing, calculated by multiplying the monthly payment by 12 divided by the number of payments per year. For example, let’s say you take out a $10,000 mortgage at 5% interest per annum. Your monthly payment is $500, and you make 36 monthly payments. You end up paying $14,100 over the course of the loan period. In this case, the APR is 14.11%