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Discuss the top three sources for companies to borrow money from, for a new building purchase, what are the typical lending interest rates, required collateral, and repayment terms at each of the three sources.
Bank loans – some companies use bank loans to secure finances for a new building purchase with competitive fixed interest rates and some type of collateral such as a home, “it is often as a personal loan to the entrepreneur disguised as a collateralized business loan” (Gibbons, 2015). The bank will charge a competitive repayment term such as a per month price for a certain time period.
Government Guaranteed Loans – These types of loans are usually subsidized and are locally focused to bring employment or public needed services to a community which also offers lower interest rates and lower requirements for approval. The down side to these types of loans are the for-profit goals and reporting system to monitor the borrowers.
Private Investors – Many companies turn to private investors who looks for qualitative returns instead of just financial. Private investors or angel investors will invest money into companies that may take 5 to 7 years to to show a return.
Gibbons, G., Hisrich, R.D., & DeSilva, C.M. (2015). Entrepreneurial Finance: A Global Perspective (1st ed). Thousand Oaks, CA: SAGE