20 Loan Types That "Regular" People Don't Know About.

I was once at the eye doctor and mentioned that I work with commercial loan software.

They paused and said, "isn't it amazing that they have software for that?"

I didn't really know what to say as they clearly thought all loans were 30 year fixed rate, but with this in mind, I thought I'd share a list of 20 different loan types that "regular" people don't know about.

1. Asset-Based Lending: These loans are secured by a company's assets, which can include accounts receivable, inventory, equipment, or other property. They are often used by businesses with cash flow or credit issues.
2. Hard Money Loans: These are short-term, high-interest loans offered by private investors or companies, often used in real estate transactions when traditional bank financing is not available.
3. Factoring: This is not really a loan, but rather a financial transaction where a business sells its accounts receivable to a third party (called a factor) at a discount.
4. Purchase Order Financing: This loan type provides funding for businesses to pay suppliers upfront for verified purchase orders, before a customer's invoice has been satisfied.
5. Mezzanine Loans: These are a combination of debt and equity financing that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full.
6. Bridge Loans: These are short-term loans that 'bridge' the gap between the immediate need for cash to cover expenses and the eventual arrival of long-term financing.
7. Non-recourse Loans: These are loans where the lender is only entitled to repayment from the profits of the project the loan is funding, not from other assets of the borrower.
8. Merchant Cash Advances: These are advances against a business's future credit card sales. They are paid back directly from the credit card transactions.
9. Syndicated Loans: These are loans provided by a group of lenders and administered by one or several banks known as arrangers.
10. Franchise Financing: These are loans that are specifically designed for purchasing a franchise. They can be used for initial startup costs, equipment purchases, or ongoing operational expenses.
11. Equipment Financing: This type of loan is specifically used to purchase business-related equipment, such as machinery or technology. The equipment itself often serves as collateral for the loan.
12. Construction Loans: These loans are designed to finance the construction or major renovation of buildings. They typically have terms of one year or less and require interest-only payments.
13. Microloans: Microloans are small amount loans, often used by startups or businesses in developing countries. They are typically provided by non-profit organizations or online lenders.
14. Inventory Financing: This loan is a line of credit or short-term loan made to a company so it can purchase products for sale. The inventory purchased serves as collateral for the loan.
15. Acquisition Loans: These loans are used to acquire other businesses. The acquired business or its assets typically serve as collateral.
16. Working Capital Loans: These short-term loans are used to finance the everyday operations of a company, such as covering payroll or rent. They're not used to buy long-term assets or investments.
17. Real Estate Investment Loans: These loans are specifically for the purchase of commercial real estate for investment purposes, such as rental properties or commercial buildings.
18. Unsecured Business Loans: These are loans that require no collateral from the borrower. Because they're more risky for the lender, they usually come with higher interest rates.
19. Debtor-in-Possession (DIP) Financing: This is a special form of financing provided to companies under financial distress and going through Chapter 11 bankruptcy procedures.
20. Trade Financing: This type of financing helps fund the trade flow from the seller to the buyer. It includes products such as letters of credit, factoring, export credit, and insurance.

So, needless to say, I do understand why there is software to support these situations. Remarkably, I wouldn't even consider this group of loan types to be the most complex.

Nextcept offers implementation support, project management, AI services, and strategic planning for lenders, startups, and other B2B businesses. We believe in prioritizing goals and being strategic with plans to avoid failed projects and sunk costs. Nextcept can help turn new ideas into reality quickly, effectively, and safely.

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