Or, you may wish to use the funds to pay suppliers more promptly to get a discount on the price of the merchandise. The third reason is to replace equity. If you wish to buy a partner's share in your business but you don't have the cash to do it, you may consider borrowing. The purpose of your loan is critical in determining the type of loan you request. You also should make sure that the timing of the repayment schedule on your loan matches the incoming cash flow you will use to make the payments.
Interest rates vary depending on the term, type, size, and risk of the loan.
Repayment may be a lump sum or on a monthly or quarterly schedule. Payments may be delayed until the funds help your business generate cash flow. The loan may be committed, meaning the bank agrees to lend to you under certain terms as you need funds without requiring you to re-apply each time. Some loans require that you maintain compensating balance levels in a deposit account. You also should be aware that the lender will expect you to agree to certain performance standards and restrictions in order to ensure that your business can repay the loan.