Borrowing and Lending

Credit is an essential component of a healthy economy. It fuels the construction of homes and businesses, helping build community. The borrowing and lending process is a complex and delicate balance, weighing the borrower’s need for capital against the lender’s concerns about the security of the investment. A solid understanding of the key components of the lending process can help you protect your interests as you weigh your options.

When you take out a bank loan, you have complete control over what you do with the money but paying back the loan also is your responsibility. You should know that failure to do so can result in the bank foreclosing on your business or property. Bank loans come with a wide variety of terms, fees, application requirements, and interest rates. These variables often differ from bank to bank and can be negotiated and adjusted. Further, the interest rates on loans may be either fixed – that is, the interest rate will remain the same for the duration of the loan, even if the market rate for interest rates changes – or variable, meaning that the interest rate can shift with the market. Keep in mind that interest rates can rise, making a loan unmanageable or very difficult to pay back. In some cases, other terms can change during the repayment period, making the success of your business subject to alterations in the bank’s demands.

You should know the laws and your rights before entering into a financial partnership with a creditor. It is imperative to the financial success of your business venture. With the right information and the right assistance, you can work with the bank to make a deal that benefits you.

Last updated Nov. 20, 2018