You have weighed all the pros and cons, assessed the risks and opportunities, and are ready to open a personal file. To start, you need a material base – office equipment, premises, raw materials, tools, and, of course, finances. Entrepreneurial activity is always associated with risk. A young organization does not yet have any long-term positive dynamics, no business reputation, no position in the market – that is, there are absolutely no guarantees of success. Therefore, credit organizations impose quite stringent requirements on such borrowers. They may differ in different banks; therefore, before applying, we recommend that you familiarize yourself with the conditions of the selected credit institution in detail.
Types Of Loans for Small Businesses
In addition to start-up capital and business development from scratch, money is needed to expand the market, acquire assets, etc. Depending on the purpose, different types of loans are suitable for you.
Cash Loan
Suitable for replenishment of working capital, purchase of equipment, real estate – for any purpose associated with significant expenses (for small ones, it is better to issue a credit card). The loan term varies from 3 to 120 months and depends on the amount, purpose, and availability of collateral. After signing the contract, the entire amount is credited to the account. For registration, it is not required to open a bank account, and you will make a preliminary decision within two hours.
Overdrafts
Given the specifics of the product, it is mandatory to have a bank account. An overdraft is opened to cover daily expenses if there are not enough funds in the current account. Payments are debited from the existing account 30 days after the transaction.
Bank Guarantees
The service is most relevant for participation in public procurement tenders. It is a fast and convenient way to provide collateral. The bank undertakes to pay any amount for you if necessary.
Credit Card or Cash Loan
To decide which suits you best, you should first understand the critical differences between these products. If you have bigger goals, then it is better to choose cash. The credit card is aimed at non-cash transactions. It is unprofitable to withdraw money – there is a commission for withdrawal, a higher interest rate is applied, and the possibility of interest-free repayment during the grace period is lost (the presence of this period is a massive plus for credit cards). Another advantage of the card is a revolving limit, which allows you to reuse money after depositing. Thus, you should opt for a credit card if additional funds are needed for non-cash settlements with counterparties’ small periodic expenses.
Stages Of Obtaining a Loan
An enterprise must be registered with the tax authority to receive borrowed funds. We recommend that you choose a bank for further service in advance and open a current account in it – this will increase your chances and expand your lending opportunities. Make an innovative business plan, reflect the costs of launching and developing the project, potential income, and planned activities to achieve the set goals to assess the development prospects and the payback period of investments. Representatives of small and medium-sized businesses in any industry will be able to take advantage of the turnover and investment programs in force until the end of the year.
Independence is good, but financial institutions are more favorable to projects based on models of well-known brands. Read the terms and conditions and choose the right loan program. Pay attention to the overpayment amount, the planned and early repayment requirements, and the procedure for calculating fines in case of violation of payment terms. Collateral for the loan will increase the chances of approval of the application and allow you to get more favorable conditions. And it is better to have several at once – in different banks. You can do this online to save time. A bank specialist will contact you and invite you to the office in case of preliminary approval. The more documents you provide when applying, the higher the probability of loan approval. Therefore, prepare a franchise agreement, a letter of cooperation, and contracts with landlords and suppliers. Small business is a tasty morsel for banking organizations: entrepreneurs are ready to overpay considerable interest on loans because, for example, they do not have enough working capital, and there is nowhere else to get it from the bank.
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