Business loan – what to look for?
The development of the company would be impossible without constant investment. For a large group of entrepreneurs, the only chance to finance various types of projects, expand business, purchase tools and equipment, take part in the tender or expand the plant turns out to be a loan to the company.
The offer addressed to beginners and advanced entrepreneurs is so attractive and rich that there should be no major problems finding such ideally suited to their own needs. However, there are a few important points to keep in mind.
Business loan – what to look for?
When choosing a specific offer, you must first of all take into account the purpose of taking the loan, because the conditions of its launch depend on it. This is particularly important in the case of high-value loans, when banks will require an accurate presentation of how the funds received are spent.
You definitely need to be immediately aware of the total cost of the loan, which is related to both its interest rate and the length of the loan period. Before making your final decision, carefully review your current offers to make the optimal choice.
Costs and security
The overall cost of the loan is very important. One of the key aspects will be the loan interest rate consisting of the WIBOR rate and the margin determined individually and negotiable. Its amount strictly depends on the current situation of the company, which has an impact on the level of risk taken by the bank.
The company’s financial condition is important, and entrepreneurs who can boast of a good credit history will be in a better position. You definitely need to be aware of additional fees and commissions. It is about the costs of examining the application, even in the event of a refusal to grant a loan, as well as a fee in the event of early repayment.
It is also worth paying attention to the possibility of using a grace period in repayment of the loan and at the same time its cost. This option can sometimes save the business owner from falling into high debt. It should also be remembered that the form of secured loan allows you to apply for a higher amount and a longer time for repayment. In such cases, the collateral will usually be real estate. Most often it is also the only chance for a loan for new companies.
Companies can use three types of loans
- Cash loan for companies – the basic advantage of this solution is no need to specify the purpose for which the entrepreneur applies for a loan. For this reason, the entrepreneur often uses the funds obtained to maintain financial liquidity and, in general, for current operations. However, you can’t count on high loan amounts. It is worth remembering that usually a company has to operate for about a year to have a chance for a cash loan, although there are offers with a reduced requirement to six months of operation, but then you should take into account additional collateral for the loan in the form of various types of liabilities. A factor that has a very positive impact on the granting of credit for cash companies will be having an active company account in a given bank. A large number of transactions is also important and can accelerate the verification of the application. However, it will not be complete without completing all important documents, such as an entry in the National Court Register, certificates from the Social Insurance Institution and the tax office. Some banks require additional financial documents, depending on the amount of credit requested. It should be noted that non – bank loans are also available for companies that have significantly simplified procedures. First of all, there is no need to provide any banking and accounting documents, and verification of applications is based on the bases of debtors. You can apply for a loan from the first day of business, but the amounts received are quite low.
- Investment loan for companies – this is a form of loan for the development of a company, which is why the application must contain the precise purpose of allocating the money. The investment loan can be used to launch a new production department, modernize the headquarters, employ more employees, purchase new objects, machines or equipment. The planned investment is to increase the company’s assets. It is worth remembering that usually own contribution is required and banks are not willing to finance a given investment as a whole.
- Working capital loan – this type of loan is extremely popular among entrepreneurs, especially those who are very active. Its biggest advantage will be constant access to financial resources and ease of obtaining it without the obligation to provide additional documents. It can be in the form of a revolving credit line in a current account or installment revolving loan. The first method consists of receiving specific amounts within the credit limit agreed with the bank, which can be used for current liabilities. After the agreed period, the entire debt must be repaid and the loan automatically renews. Importantly, entrepreneurs do not bear interest costs when the debit is not used. In turn, installment working capital loan involves repayment of principal and interest in the form of installments. The amount of working capital loan directly depends on the company’s turnover and profits, and each bank has its own rules. It is worth remembering that the revolving business loan has a shorter loan period compared to the investment loan.