Lending is a part of the business, which cannot be ignored. In general, lending means a temporary transaction of money or property, expecting the person to repay in time with or without the interest. There are different types of lending and lenders available in the market, and a borrower needs to understand each of them before making a deal.
Who are the Lenders?
A lender can be anyone having additional resources to lend. It can be a person, government, or private institution. Most of the banks are nothing but professional lenders. The interest rate varies from lender to lender and place to place. On many occasions, the government rolls out policies for a fair transaction. The interest amount is inversely proportional to the chances of repaying; therefore, the interest rate is more when the risk is high, and vice versa.
You can see that most of the financial institutions charge a significantly higher interest rate while lending to start-ups. The reason behind the high-interest rate is the uncertainty of repayment. Therefore, it is very hard to sanction a small business loan from a financial institution.
A lender is completely different from the investor. Investors generally are the stakeholders of the company. They get additional profit if the company does well and suffered losses if it becomes bankrupt. On the other hand, lenders stay away from your business. Therefore, they will not demand more if you do well, and vice versa. They only want you to return their money with due …