Let’s define what credit options, in general, are available in Massachusetts, USA. A credit is a loan product issued by a lender (in this case, a bank) to a borrower at a certain interest rate for the use of money. Loans are issued to individuals and legal entities.
Loans to citizens are divided into non–targeted, when the bank issues a certain amount for the needs of the borrower, and targeted – for the purchase of housing, a car, repairs.
Credit products available in Massachusetts for legal entities and individuals
Consider the types of credit products for legal entities in more detail:
- Overdraft. It is one of the types of loans issued to organizations in the absence of funds in the current account to cover gaps in the primary account. The size of the overdraft limit usually depends on the average monthly turnover on the current account. After the funds are credited to the account, they are written off to repay the overdraft;
- Targeted loan. Usually, a targeted loan is issued to replenish working capital, to purchase raw materials and fixed assets, to invest in construction and scientific research;
- Non-targeted loan. The essence of this loan product is to transfer funds to the account of a legal entity in a single amount;
- Credit line. Legal entities are given the opportunity to use borrowed funds in stages within a certain limit. There are two types of credit line — revolving and non-revolving. With the first type, a certain limit will be set, within which it is possible to repay and borrow the necessary funds again, thereby optimizing the cash flows of the organization. A non-revolving credit line makes it possible to receive cash in parts within a certain limit for a certain time, while the phased repayment of such a loan does not increase the amount of available funds;
- A business mortgage is a loan for small and medium-sized businesses secured by commercial real estate being purchased;
- An investment loan, i.e. the provision of funds for the implementation of a certain project, which is associated with the acquisition of property and repayment of the loan from the profit received as a result of the implementation of this project.
Next, consider credit products for individuals:
- Mortgage loans. It is one of the most popular credit products, allows you to purchase secondary housing, land plots for construction, allows you to participate in shared-equity construction. It is one of the most long-term credit products, the duration of which can be several decades;
- Credit card. It is one of the most common credit products, allows its holders to perform operations that are carried out at the expense of funds provided by a credit institution within a certain limit. Basically, these limits are set in accordance with the solvency of its holder;
- Consumer lending (personal loans). Currently, this type of lending is carried out at the expense of the services of agents (most often these are retailers that allow their customers to get credit funds to purchase the goods they like directly in the store). Individuals most often use this service to purchase furniture and large household appliances.
- Payday loans. A payday loan is money in debt that can be issued by a payday lending service. Complete information for those who want to be a competent borrower. Borrowing money is, of course, not the most pleasant situation, but sometimes it is inevitable.
- Educational/Student loan. This is one of the most promising types of lending. Most often, the terms and interest rate for this type of lending are more profitable than for a regular consumer loan. This loan is granted in equal tranches before the start of each academic semester. For the period of study, a deferral is often provided for the payment of the principal amount of the debt.
Thus, it can be concluded that the importance of developing new credit products lies in the fact that when developing new credit products, a competitive advantage is created and the position of a credit institution in the market is strengthened.
How to avoid loan denial?
Lenders evaluate the creditworthiness of legal entities according to several criteria. Among them: the level of profit, turnover, liquidity, features of the business niche in which the company operates, the ratio of accounts receivable and accounts payable.
Having analyzed the indicators, the bank classifies the potential borrower to a certain category according to the degree of reliability. The higher the risk, the stricter the credit terms and the greater the probability of failure.
Banks are more willing to lend to organizations that meet the criteria:
- the period of activity is over 24 months;
- company registration in the United States (if you issue a business loan);
- good credit history;
- no tax and contribution arrears;
- positive financial balance.
If the company does not meet the terms by 100%, you can apply for a small business loan, repay it and develop a successful reputation. And another thing: lenders are more willing to issue controlled targeted loans.