When deciding on going forward with a business venture, it is often a requirement for an individual to procure some type of loan, seeing as most start with just an idea as their basis. When borrowing money, however, there are a number of things one must be cognizant of. Loans, though beneficial, do come with restrictions as well as specific requirements. Jumping into accepting a loan, without first considering what accompanies it, may lead to an adverse outcome for business owners and the like.
Acquiring a loan is essentially borrowing money that will require interest depending upon its specifications on time. For example, you may have a grace period prior to incurring any interest. Though "personal loans," which include borrowing money from personal relations, does not fall under business law without any contractual obligations, there do exist loans that do very much adhere. These include "business loans," which encompass two specific types, those of the short term kind and long term.
Loans seen as short term include "working capital loans" and "accounts receivable loans," while long term loans comprise those used for real estate transactions as well as the "expansion of a business." Long term loans may span periods of time, such as that of a decade or more. Loan laws also vary according to the state in which you reside. An example would be that of short term loan laws as set forth within the state of Ohio. First and foremost, in order for a business to operate as a "short term lender," a license must be procured from the state's "Division of Financial Institutions," which must be renewed every year. Limits do exist according to the law as well.
In accordance with Ohio state law, such loans must not surpass that of $500, with "annual percentage rates" not surpassing 28 percent. In addition, individuals have a specified amount of time to pay back money, which is that of 31 days. Lenders are also required by law to have borrowers fill out and obtain contracts that explain all the details related to the loan. Examples of such pertinent information include that of fees and varying interest rates. Lenders in Ohio must also specify in bold that complaints as to their service may be submitted to the "division of financial institutions."
Loans may also be specified according to whether they are "secured" or "unsecured." A secured loan entails that the borrower put forth assets so as to assure that repayment occur in one way or another. An example of such a loan is that of a "mortgage loan" where a lien may be put on the property if the borrower fails to repay a loan garnered. Unsecured loans are those in which security is not placed in relation to the borrower's assets. Examples of such a loan include credit cards and "corporate bonds." In these cases, however, you will be expected to repay what you have used by law. Therefore, despite security or lack thereof, one must be wary of how exactly they go about borrowing money.