Debt financing as a business solution

Debt financing is an option that may be available to many Illinois businesses. In most cases, a business will be required to secure a loan with business collateral or other types of guarantees in order to obtain the financing.

Several options are available, including the use of guarantors who are creditworthy individuals or companies that agree to repay the loan in the event the business fails to make its payments. Some businesses secure loans with equipment that it owns. Other types of collateral may include securities, accounts, insurance policies, inventory, merchandise or commercial real estate.

Small businesses that are just starting up may choose to finance the debt they incur through the start-up with the help of family members. Some use available balances on credit cards to start a business. People should be aware of the effect of high interest rates credit card use for such purposes. For those who have excellent credit and a good reputation with their bank, unsecured loans may be a possibility. In the event a small business is considering debt financing, it is advisable it has a business law attorney draft or review the loan documentation, even if the lenders are family members.

Many people start new businesses every year in Illinois. In order to do so, most need a funding source. As it normally will take time for the business to become profitable, finding a good financing option can be vital. When people are considering their various available options, they may want to review them with a business and commercial law attorney. Entering into the wrong kind of agreement or one with problematic interest rates or terms may end up hindering the ability of the business to grow or to stay in business due to the payments.

Source: Entrepreneur magazine, "Debt Financing", accessed on Jan. 11, 2015

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