There are a number of loans you can also take out:
Short term loans: You will get this from a bank overdraft you require no security usually based on your current account for cheques, direct debits etc. Normally no interest, credited but interest can be charged to access over draft just write cheques possible rate of approved overdraft =12% unapproved overdraft=24% at least postponing payments to suppliers and subcontractors.
Factoring credit- The factoring company pays 95% and then he peruses the suppliers for the rest of it.
Loan of a credit union- you have to be a member to get a loan there is a interest of possible 10%-12% it works out roughly 1% a month you would pay your loan off as you go along etc. there is a limit to the amount you can take out for instance for every £100 you have in the credit union you can take out £1000.
Medium term loans- Used for buying equipment, renovations etc. up to £50,000 over 3 years. You would approach a bank for a loan-usually paid back monthly which is called a term loan. Same amount every month and pay a bit of capital and less interest.
Higher purchase: for equipment, machinery etc. Using the purchased item as security and if you stop paying they take the item back off you again. You would have equal payments weekly or monthly it would be arranged by the supplier. The repayments are worked out something similar to a loan, very high interest approx 18%. The alternative to higher purchase is leasing which is something similar to higher purchase but you never own it.
Long term loan- (contracting building) mortgage- using property as security against loan repayments. A lot of the increase of new housing is due to the cheap loans available at the minute your mortgage rate is approx 5%.
You can payback a mortgage by paying interest and capital at the end of the period you would pay your loan back. Your rate of interest would verify of the two years.
There are a number of finances available for public companies such as:
Depentures- (loan stock) these are loans raised by companies, they are available to the general public they have a fixed rate of interest if the company goes bankrupt the depentures will be worth very little.
Share issues- PLC (public limited company) can raise extra cash by offering you shares. One method of issuing shares is a “rights issue” each share holder has a right to buy new shares. Company has a valuation of £100 million (shares worth £1 each on market) has a rights issue allowing share holders to buy a shares at 95p. A private can also go public it can float on the stock market.
Venture capital- there are some tax incentives investing in new companies, often the people investing in the companies are called venture capitals. They are either wealthy individuals are companies who gain a share holding in return for investing money.
Grants are sometimes available- they are available from centre of local government to help industrial developments. Grants are often given to build or to put up buildings in certain areas e.g. inner-city. As an alternative cheap loans would also be available with a reduced rate.
Taxation- governments can help business by reducing tax provided that they are helping to reduce unemployment in some case.