It is a rare day when a person manages to save up all the money they need themselves to get their business idea off the ground. Even after the business opens, it can take several months before it starts to turn a profit.
While the founders of the business may be able to get investment capital, often, they will also need to take out loans.
Many businesses in New York City get their startup funding both through traditional loans and non-conventional borrowing:
- Some businesses may qualify for a Small Business Administration loan program. One advantage of loans backed by the SBA is that they offer an emerging business access to capital at affordable interest rates.
- Many businesses will have to get a loan funded by and offered through a traditional bank or other lending institution.
- Sometimes, it makes sense for a business to offer a promissory note to another business for a specific purpose. To give just one example, a business may need to purchase equipment on credit from a vendor. Likewise, many businesses maintain lines of credit with suppliers.
- Especially with respect to smaller New York businesses, private parties who are not in the lending business, like relatives or friends, may front money in exchange for a promissory note.
All of these loans are largely governed by what the written loan agreement says.
Of course, there also New York and even federal laws which factor into the equation. The point, though, is that a business borrower needs to make sure it understands all of its commitments and rights. Otherwise, it can find itself stuck in a bad deal that hurts the business.
What happens if I have a dispute with a creditor?
Business loan agreements are often more complicated, and more up to negotiation, than are consumer loans and even home mortgages.
In a business loan, disputes can erupt even if the business has been timely on its loan payments.
For example, if the lender just does not feel comfortable with the overall health and prospects of the business, the lender may call its loan due.