Business And Consumer Loans (Part 2)
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19 Terms
Business Loan
a money lent to an individual intended specifically for business purposes. It may be used to start a business or to have a business expansion.
Consumer Loan
money, goods, or services provided to an individual in the absence of immediate payment for personal or family use.
Collateral
a borrower’s pledge of specific property to a lender to secure repayment of a loan. It may be real estate or other investments.
Term of the Loan
a maturity date to pay the entire loan in regular payments over a set period of time.
Business Loan Purpose
used for business purposes such as starting a business or business expansion.
Consumer Loan Purpose
used for personal or family purposes.
Business Loan Collateral
may require collateral such as real estate, other investments, equipment, fixtures, or furniture.
Consumer Loan Collateral
may also require collateral.
Business Loan Guarantor
requires the business owner to sign as guarantor.
Consumer Loan Guarantor
does not usually require a guarantor.
Business Loan Documents
requires a credit report, income tax returns, and the company’s financial statement.
Consumer Loan Documents
may require a credit report, bank statements, income tax return, certificate of employment, and employee pay slips if the borrower is employed.
Business Loan Term
generally shorter than a consumer loan.
Consumer Loan Term
generally longer than a business loan.
Business Loan Interest Rate
usually higher than the consumer loan interest rate.
Consumer Loan Interest Rate
usually lower than the business loan interest rate.
Business Loan Types
include microloans, invoice financing, mezzanine financing, bank loans, asset-based financing, cash flow loans, and business cash advances.
Consumer Loan Types
include credit cards, mortgages, home equity lines of credit, refinances, auto loans, student loans, and personal loans.
Business Loan vs Consumer Loan
Business loans are loans for businesses, while consumer loans are loans given to individuals for personal or family purposes. Both may require collateral, but they differ in purpose, requirements, terms, and interest rates.