@khaleelkazi wrote about having more diversified content on LEO. Now I'v had no college degree in business. I've learned my lessons in the university of World Wide Web. I thought of brining my STEEM audience along with some of the stuff I've come to learn. Don't think of these as financial advise. I'm doing what I can to share more knowledge and increase financial literacy.

Getting Into Debt

• Debt is money that has been given to you to use, that must be repaid; typically along with interest.
• Debt confers no ownership interest therefore no right
  to participate or have a say in how a company is
  operated.
• Debt is a legal obligation/contract.
• Failure to repay debt can cause legal consequence,
  which might include losing control of the company, or
  ultimately bankruptcy
• Bankers want to avoid risks and make most profit for their shareholders
• This leads us to credit risk

What is Credit Risk?

• All financial institutions seek to minimize risk of default.
• This is based on the credit risk of the borrower.
• Credit/Default Risk is the risk that the borrower will not
  repay the loan and interest on time and in full.

As a result, we have:

• Secured vs. Unsecured Loan
• Secured loans have less default risk than unsecured loans

Covenants

• Loans with covenants have less risk than those without

Few Notes On Term Loans

• It's a contractual agreement to repay money over a specific period of time at a specified interest rate
• Most often repaid monthly from cash flow
• Term loan is secured by assets or a personal guarantee
• Banks are major source of business loans
• Amount of the loan, time period, repayment terms, and interest
  payable are all open to negotiation and agreement
• Interest only paid on amount drawn
• Inexpensive to set up and very flexible for small businesses
• Can be fixed rate (interest rate stays the same for the term of the loan), or floating rate (interest rate fluctuates with changes to the prime rate)

Notes On Mortgages

• Mortgage is a type of loan that is secured on an asset, typically property
• ▪ Banks, insurance companies, pension funds lend to businesses on this basis
  -Typically has term of 10-20 years or even 30 years
• It's a long term debt

Line of Credit (LoC) AKA Revolving Loan

• Used by 75% of all small business owners
• Used primarily by small business to fund Accounts Receivable and Inventory purchases
• Can be unsecured, but usually secured by company assets, and personal guarantees
• Banks would ask for forecast cash flow statements from the business
• Inexpensive to set up and competitive interest rates offered

A/R Factoring (This Seemed Like A Cool Idea To Me)

• The factor takes over the invoicing and A/R collection for a business.
• The factor typically advances 80% of the approved A/R to the business in 24-48 hours.
• Some businesses might do this to meet its present and immediate cash needs
• This might becoming a thing of ancient history thanks to crypto :)

If you need to learn more some of this might helpful with pros and cons:

Credit Cards (I'll Keep this Short)

• Similar to loan, but not tied to any particular asset
• No repayment schedule; only minimum payment
• High interest
• Cool way to get perks, points, cashback and tons of other cool things
• Self-employed can count a business

Supplier Credit - Bank-less Loan

• Provide credit on both physically assets (e.g. purchase of equipment for your business) and actual supplies purchased.
• Can be very accommodating for new businesses’ but remember that it’s a liability for the company.
• Might also tie the company to one supplier and limit the ability to shop around for less expensive option.
• Interest rates can be more competitive than bank sources.

Hope you liked the part 1 of EduFi series. Don't take any of these as your study notes. They could be good notes. But they are more like personal notes. I'll see if I can make this a daily series. Always do your own research. Page dividers are from @krunkypuram