Borrowing money for your company: possibilities and preparation
Taking out a business loan is very different from private. Before comparing company loans, it is good to know what possibilities (even more) there are to borrow money for your company. Also, thorough preparation is not an unnecessary luxury, to ensure that you make the right choices. rockmanvortex.com for an assessment
Opportunities to borrow money for your company
Money you borrow is not always for private use – you may also need money for your business. To start a business or to invest extra in your existing company. Borrowing business money can be done in many ways. You can knock on the door of friends or family, there are organizations that provide special micro loans, crowdfunding is an option and sometimes factoring (the advance of invoiced amounts) can be interesting. We further explain various options with the Business loan types.
Take out a loan with a bank
In addition to all those options, you can of course also “just” go to a bank to borrow money for your business. The most logical thing is to think of a business loan, but that is not necessarily necessary. Borrowing money from a bank can be done in two ways:
- Private loan on your personal income
- Business loan based on the company results
Borrow private money for your company
If you step into the bank as a private person for a “consumer credit”, it doesn’t really matter what you are going to spend that money on. Of course, if the bank asks you to tell us honestly what the spending goal is, that goes without saying. For the bank, examining an application for a private loan is a matter of assessing whether you have enough and sufficient income to pay the monthly loan costs. Obviously, they want you to be able to bear the monthly charge without any problems and therefore pay or repay the loan amount plus interest to them flawlessly.
Maybe you have a company besides a salaried job? Then you may well be able to take out a normal private loan on that income. This way you get money to invest in your business. Are you a full entrepreneur? Even then, a private loan is not excluded: the bank then looks at the income you get from your company.
Business Credit Application Review
To assess a business loan, the bank delves into the figures of your company. Many banks request the annual figures of three years to get an idea of the financial situation of the company. Turnover, costs, profit – these are important elements. A business investment can very well lead to an increase in turnover and profit, the best thing if the bank believes in it. Or at least they must be convinced that paying the loan charges will not be a problem.
Business credit banks
Traditionally, we are used to going to our payment bank for a loan. That is of course still possible. Certainly if you do your business payment transactions through that bank, you probably already have a relationship, they already know you and your company and they have insight into your business operations. That can make taking out a business loan easier.
New online business loan initiatives
Nevertheless, it is also good to look at all kinds of new initiatives in the business credit market. There are more and more online initiatives for providing business loans. Not all of them are that strict and require as much paper and numbers as ordinary banks. It may be that they therefore charge a (much) higher interest.
Compare business credit opportunities
So there are more and more options for taking out a business loan. The question then is: where can you best knock on the door? The answer to that question naturally depends on your personal and business situation. Aspects on which you can compare business loans are:
- Simplicity and speed of closing: with one you have to deliver much more to have it assessed and it takes much longer to get a decision than with the other.
- Requirements regarding the number of years your company has existed: at some banks your application will simply not be processed if your company has not been running for two or three years.
- Interest: the interest you pay can vary greatly per provider. Ultimately, the interest rate determines a large part of the costs of your business loan and is therefore an important aspect to compare.
- Closing costs: Banks do not normally charge closing costs for private loans, but for business loans they do. The costs can vary considerably, which is good to have in the picture.
- Conditions: what about early repayment, for example? If things are going well you probably want to get rid of the loan faster – is that possible at no cost?
You can see many of these aspects in our business loan comparison, in which we list the new online business loan initiatives for you.
Preparing for a business loan application
Borrowing business money requires preparation. It is good to think about the situation and wishes of your company before you start comparing company loans. This way you know what you are looking for and comparing becomes easier afterwards.
Questions in preparation for a credit application
There are major differences between the providers of corporate finance. That is why it is important for the right choice that you think carefully about your business situation and wishes. If you are sensible, you will therefore answer the following questions in preparation for your credit application:
- How is your company doing?
- What amount do you want to borrow and for what?
- Where does the repayment come from?
- How fast are you going to repay the credit?
- When do you need the money?
- What can the loan cost?
By visualizing this for yourself, you can exclude a number of lenders fairly quickly, because their offer does not suit your situation and wishes.
1. How is your company doing?
The very first question is actually: do you already have a company or do you still have to start it? Many lenders do not want to grant a loan to starting entrepreneurs – you usually have to knock on the door with a strong business plan at a large bank or with a party such as credits.
Then it is important to have a clear picture of your own figures. There are lenders who use a minimum turnover amount to want to lend money to your company.
Even if there are lenders who do not ask for annual figures – it is important for your own understanding of the financial situation of your company. Borrowing money is fine, only better not when a cat is in a corner because it is going badly. With borrowing you only increase the burden and the problems can become bigger.
2. What amount do you want to borrow and for what purpose?
Of course have an amount in mind that you want to borrow. Is that intended for, for example, stock financing, for the purchase of a large machine or perhaps a commercial building? Typically, the lender will want to know where you are going to spend the money, but it is also important for other elements of your loan. For example, whether you need flexible financing where you can repay at any time, or a fixed loan with a long term.
3. Where does the repayment come from?
If you need a temporary capital injection to buy a large lot that will be sold again quickly, then that is a completely different story in terms of repayment – if all goes well you will have the money back together very quickly – than when you have a large machine you want to pay off in a number of years.
4. How soon will you repay the loan?
The answer to the previous question already gives you an idea about the term of the loan that suits you. This helps filter out the interesting lenders: there are parties that specifically focus on short-term financing.
5. When do you need the money?
The turnaround time for applying for a business loan differs considerably per provider. There are parties that give you a definite answer in no time about whether or not you can take out a loan there, sometimes even without having to provide your annual figures. They do the assessment through various systems and do not need your grades for this.
Other providers do ask for figures and take longer to assess. These are often more attractive in their interest and / or costs.
6. What can the loan cost?
Maybe you think: well, what is needed. Yet there are limits: you will not take out business financing at any price. It is the intention that the borrowed amount is used to earn extra money with it – and not that you lose so much money because of very high interest and costs that your company can be endangered.
Take out a business loan that suits you
Now that you have worked all this out, you are well prepared to start comparing business loans. With your situation and wishes in mind, you can easily cross out a number of providers. This makes it easier to find the lender that best suits your business – just put the answers you gave yourself next to the information in our business loan comparison. This way you come to a shortlist of interesting credits for your company and you can choose which provider (s) you will request a quote from.
