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What to know about small business loans

On Behalf of | Jul 12, 2023 | Contract Disputes

It isn’t uncommon for businesses in New York to fund their operations by taking out loans. In some cases, these loans may be little more than unsecured credit cards or lines of credit secured by a home or other assets. However, your company may also qualify for microloans or other lines of credit targeted at firms that need help solving problems.

Key contract terms to know

A typical business loan document will list the date upon which the agreement takes effect. It will also include the parties to the deal, the amount to be repaid and a promissory note acknowledging that you will repay the loan in a timely manner. It will also outline various penalties that might come into play in the event of a late or missed payment. It should also outline the protocols for resolving any contract disputes that might arise during the loan repayment period.

Other terms worth understanding

Collateral is simply anything that you use to secure a loan, and common forms of collateral include a home, car or ownership in your business. A cosigner may also be used to secure the loan. The cosigner is responsible for making payments in the event that you don’t. A lien is typically placed on assets until the loan is repaid, and enforcing the lien allows a lender to take your home, car or other items put up as collateral.

Failing to repay a loan in a timely manner could result in a hit to your company’s credit score. It may also result in losing assets or being named in a lawsuit.