Private parties are not the only ones who can get a loan by lenders. Even companies can take advantage of some loans created specifically to support companies, both emerging and already consolidated, through financial products created ad hoc. What do they consist of and what sets them apart from personal loans for private individuals? What advantages do they offer? Does the company you are applying for finance have to meet the requirements to get the desired liquidity?
Small loans for small business: Get your financial freedom today
As with personal loans for private individuals, even if the loan is destined for a company, its operation remains almost identical. The sum of money that is requested is not intended for use by the normal citizen but is aimed at building a new business or supporting an existing one.
As with all other loans, even in this case the sum of money received on loan must be returned with the payment of a certain number of monthly installments whose amount is given by the sum of a part of the capital and one of interest.
Since this is a finalized loan, the amount disbursed by the credit institutions cannot be used for other purposes than those that involve the satisfaction of business needs.
The company loan is aimed at all those who are the owners of a company or of an individual company or, still, work on their own. If necessary, they can apply for an online small loan for small business at Oak Park to expand their company or to provide it with new professional equipment. Furthermore, young entrepreneurs have the possibility of founding their own company thanks to the credit granted by the banks. In these cases, a percentage is often considered a non- repayable loan.
As with any other consumer credit product, even in the case of corporate loans, it is necessary to demonstrate that the granted capital can be returned together with the interest accrued and that the risk of insolvency is practically close to zero. Since the personal loan is intended for companies and not for private individuals, it is no longer the economic situation of the applicant to be taken into consideration, or at least not only that but all that is company turnover.
The first thing that differentiates private lending from that for companies is when it is necessary to establish the capital needed to meet the needs of the applicant or, in this case, of the company. If, in general, it is the private citizen who indicates to the credit institutions the amount they would like to get on loan to meet their needs, in the case of company loans it is the bank itself that suggests the appropriate amount to carry out the project. enterprise, whether it consists in an expansion of the same, or that involves the creation from scratch of a new start-up. It is possible to better understand this concept through an example.
Let us consider the case there is a rather active company, present on the territory for many years and which, until this moment, had never encountered liquidity problems. At some point, it happens that a machine breaks and you need to repair or replace it. This operation requires the use of capital, for example 40,000 USD, to send the company in economic difficulty for the first time. Once the matter was presented to the credit institutions, they could establish that the capital needed by the company to revive its finances and overcome the moment of crisis is, in fact, 40,000 USD, or the money invested in the repair or replacement of the machine reported as an example.
Any other loan request exceeding that amount will not be granted but, if the owner of the company deems it sufficient, he can request the loan even for a lower amount without risking it being rejected.
Since it is the banks that determine the degree of economic difficulty that the company is facing, it is good to document every event that has led to this need for new liquidity and to present all the documentation collected to the credit institutions when they go to request the loan.
To establish the liquidity that the company needs to face the period of the financial crisis are, as already seen, the banks that, based on the documentation presented, decide which is the maximum amount that can be paid to support that particular company. But in addition to the various causes that led to the need to apply for a loan, the credit institutions take into account different facts when it is necessary to establish how much capital can be granted. One of these is the type of company that is requesting the loan. For small and medium-sized enterprises, often the conditions of the financing are even more facilitated to allow them to emerge in the market and the amounts disbursed reach even 150,000 USD.
Some financial products, on the other hand, are destined for particular companies which, depending on the area in which they operate, deal with research and development in that specific sector. For companies that operate in the social sector and that stimulate employment and the creation of new jobs, there are still other financial products that include both small loans with a minimum base of $ 25,000 and the most important loans whose amount paid can reach a maximum of $ 500,000.
Funds for corporate loans, especially for those companies that have a social purpose or deal with innovation and research, are generally granted by the European Union precisely to encourage entrepreneurship in these sectors.
The amount of money loaned directly affects the time required for its return. For smaller capitals, we start at a minimum of three years, which includes the payment of 36 monthly installments. If the required liquidity is greater, the repayment becomes medium or long term and may exceed five years (involving 60 monthly installments ) up to, in some cases, even a decade in which the number of installments to be paid rises to 120.
What the bank values
The documentation to be presented to obtain a corporate loan differs considerably from that required by private individuals. In addition to all the data regarding the causes that led the company to request new liquidity, the credit institutions evaluate the corporate balance sheet as a whole, which also includes the analysis of productivity and the economic assets and, possibly, real estate that the company has at its disposal. All the characteristics of the company and the market in which it operates, with possible strengths and presumable obstacles and difficulties, are then analyzed, the internal organization and, above all, the growth prospects.
A loan, which is aimed at private citizens or companies, for credit institutions, always represents an investment of one’s capital from which an economic gain must then derive.
In the absence of growth prospects, there is little chance that the company can reaffirm itself on the market and regain the liquidity it needs to move forward and, at the same time, return the loaned capital to the bank, paying all of it, of course, for related interests. These companies are unlikely to get the liquidity they need because they cannot provide sufficient guarantees about repayment.
Companies with strong growth prospects, on the other hand, have a good chance of being able to grow economically and guarantee the bank can pay off the debt with them.
Who do you request them for?
Are corporate loans available at all credit institutions? Is it better to turn to some rather than to others? Unfortunately, unlike what happens in private loans, which can be requested indifferently at any bank or financial institution, both in the branch and online, loans to companies can only be provided by specific credit institutions authorized to offer this service.
Depending on the specific requirement that the company must meet, the financial product that is suitable to satisfy it must be requested, both in terms of the amount and the time and methods established for the return.
Sometimes, it is possible to request a corporate loan even from traditional banks and financial institutions if, in that specific period, they have available financial products suitable for the purpose. However, this solution is not always possible because traditional lenders usually do not offer financial products aimed at companies but focus mainly on private individuals and only in certain periods some banks offer financing also for businesses. If they are present, these are in any case of a small amount and solid guarantees are required in order to access the credit.