How Government Loans Helps to Start a Business

How Government Loans Helps to Start a Business

The person who never has to take a loan in his life is a lucky person. Loans are the fund which is borrowed from any financial institutions, bank, or other sources in a condition of repayment of principle with interest in a fixed period of time. Loans are very useful when we are in a financial crisis. But sometimes it can put us in trouble; meaning if we cannot repay the borrowed amount, the interest according to the loan will get doubled even if we miss any single repayment. The loans are mainly of two types secured and unsecured. In an unsecured loan, the lender doesn’t pledge any of the assets of the borrower. In a secured loan, the lender pledge the asset of the borrower equal to the amount is taken as a loan. In a secured loan, the lender takes the possession of the asset if the lender doesn’t repay the amount taken as loan.

In general, the persons take a loan from private banks or financial institutions to start a business, but now the government also helps new business entrepreneurs to achieve stability through small business loan programmes. But most people do not take this government provided loans because of their misconception towards the government procedures. They believe that the government loans can pay off new business cost with little or no risk.

What are the major features of Government Loans?

We have a misconception that most of the government projects or grants are always provided for targeted customers. The government provides these loans to benefit all of the business owners without any discrimination. The government loan service fees are very low as compared to another type of commercial loans, but the repayment is just like other loan providers.

Types of Government Loans

The government start-ups loans are available in different types according to the need and area of the project development. For instance, sometimes the government loans are provided to start some agricultural development of a rural area, or for some disaster relief projects etc.

Benefits of Government Loans

Most of the commercial loans are secured type of loans, so they ask securities such as a house, car for taking a loan. As a new entrepreneur, this type of pledging of assets causes a lot of difficulties. But in the case of government loans, these types of terms and conditions are not followed. So the government loans are less expensive than other commercial bank loans.  Another thing is that new entrepreneurs always face difficulties in opening consumer credit card accounts.  The government loans providers help the new firms to build their own credit histories. Moreover, the start-ups can approach the commercial banks for further financial help after closing the government loans.