Business Loans | When and how to request them?

Most companies at some point need some type of financing that allows them to continue with their activities. However, due to the wide variety of solutions that exist, it is good to know which is the one that best suits the needs of the company and is flexible.

If you need financing, we will tell you everything you need to know so that you can decide the best one.

What is covered by business financing

Business financing is a very delicate subject and one that any company should consider, regardless of the size or sector where it operates. In recent years we have seen how business loans have revolutionized so that it is good to know some relevant aspects in relation to the matter.

This is not a subject to be treated lightly . It is necessary to indicate that not only must know what is signed but the concepts of what the rubric is stamped on.

Although this may seem contradictory, statistics show that many people do not know the basic terms that are handled economically and this is not an insignificant matter since it can derive really important legal and financial consequences.

Business Loans | When and how to request them?
Business loans

A changing reality in business financing

Loans for companies are currently very changing and dynamic for financial institutions due to the emergence and consolidation of new technologies that are directed through the Internet, the emergence of modern methods and competitors in the sector that have allowed the boom, as well as the birth of an era that many call "golden" in regard to this issue.

Now, it should be noted that, fortunately , bank financing is not the only option available . Currently there are many companies that operate in the economic environment and that have created many alternative financing methods for companies that complement an offer of loans accessible to all types of organizations regardless of size or sector in order to finance projects and activities.

If you want to apply for a loan to launch your business in the wide competitive market or want to turn it around, these are the different alternatives you have :

  • Banks : this is the way many companies resort to when they have to apply for a loan. How long does it take to grant the loan? Depending on the length of time the company has been a bank customer and, of course, its solvency, although in the best of cases it is a process that can take several weeks. A less demanding financial solvency is required each time, as there are more and more offers from banks. In addition, in search of customer satisfaction, they tend to be faster and faster.
  • Lenders and private equity companies : the advantage of these companies is that they offer services that can be carried out over the Internet , which allows the process to be made faster, allowing the application to be done in a very short time. On the other hand, you will be able to know the approval of the request in a period that does not exceed 24 hours and even.
  • Crowdlending financing platforms : these are entities that through a platform offer their services for you to contact private investors who decide whether to approve the loan requests you have made. These investors offer the credits based on the level of risk and the money loaned will be returned with interest. It is a procedure that is also carried out from the internet and in which you will be able to have an answer within 48 hours.

A new alternative for companies

There is a business concept that allows entrepreneurs to use a certain product or service in exchange for a monthly fee and is known as renting . What is renting?

It is a process by which you can rent a car, machinery, office supplies or any product that is essential for the development of the company. The best thing about this option is that these rentals include maintenance costs, replacement services, insurance ...

It is a highly recommended option, for example, if you need a fleet of vehicles temporarily and thus avoid applying for a loan that you will have to repay with the relevant interest, since you will only have to pay the monthly rent.

As you can see, renting also provides great benefits, highlighting the possibility of having assets immediately with the only cost of paying a monthly fee, which has made more and more entities and banks offer this type of service . Likewise, the expenses derived from the renting may be deducted from the Corporation Tax and the Income Statement.

Other loan options to choose from

There are many types of financing that a company can choose and that have evolved to adapt to the needs of each one. Among these options are:

  • Confirming : it is a service that is offered to companies to pay in advance invoices to suppliers and thus have liquidity, allowing in turn to have greater trust and reliability on the part of suppliers to maintain a close relationship with them . With this type of credit, companies can manage all payments, especially when they have many providers, allowing management to be much easier.
  • Factoring : it is one of the financing means most used by public entities. It works like remittances. That is, the company presents a document to the bank (remittance and identification of credits) that is like an invoice, with the financial institution paying the invoices of the company's clients, so that later it pays later in full. or in monthly installments that generate interest, which are much lower than a traditional loan. In other words, it is an advance offered by the bank. Due to the high demand every day more private equity companies offer this type of services.
  • Leasing : it works very similar to renting since it allows you to rent machinery and pay a fee each month for a period of 1 to 10 years, with the difference that at the end of the term you will have to buy the property . In this way you will have low fees for a long period and a higher final fee that will allow you to finish paying for the machinery.

As you can see, the number of loans for companies that you can opt for is multiple depending on the type of need your business has. According to its characteristics, advantages and disadvantages, it is advisable to go to one or the other. The fact that you know what are the types of loans and financing alternatives that exist will allow you to make the best decision.

Credit lines, a public aid

When liquidity is needed, it is possible to resort to the credit lines offered by the ICO Official Credit Institute, which can be accessed through banks. It is important to emphasize that the capital received comes from public funds, so that the conditions are established by the state institution. Check out our guide on ICO loans to find out everything you need to know about this line of credit.

These lines of credit were created so that companies can opt for financing from banks since, during the crisis, these concessions decreased considerably.

The characteristics of this type of financing are the following:

  • They lack commissions.
  • The financing terms and conditions are established by the institute.
  • It is the financial institution that establishes the approval requirements and assumes the risks of non-payment.
  • There are two lines that provide liquidity and offer financing that promote export activity.

Conditions to apply for this type of loan in Spain

  • The company must be registered in the country.
  • It must have a minimum of benefits .
  • Some financial institutions require that the company have several years in operation.
  • You must have the correct and updated documentation with the payment of taxes.
  • If you choose to apply for a bank loan, they will require a business plan.
  • The company must have guarantees as assets or a guarantee .

What should be considered before applying for business loans?

Before applying for a business loan, you need to ask yourself certain questions , for example:

  1. Is it really necessary ?
  2. Can the company cope with the payment ?
  3. Is it the right time to apply for a loan?
  4. What are the expenses that have to be paid?
  5. Does the company have the ability to bear unexpected expenses ?

These are questions to ask yourself that are helpful in making the decision to apply for a loan . On the other hand, it is important not to resort to any lender, it is best to carry out a study of the type of loan that is needed and thus carefully compare the different options.

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