In the process of doing business, entrepreneurs and companies often need to attract borrowed funds. They may be required to implement investment projects or to replenish working capital.
Types of loans for organizations
Before obtaining a loan, an organization needs to decide on the most optimal type of lending. There is a wide range of business loan products on the market today, which can be classified on various grounds.
The first criterion may be the source of the loan. Business development is impossible without attracting additional funding, including external funding. It can be carried out by banks and private investors. The latter often do this in exchange for receiving part of the profit from the project. Therefore, most companies prefer to contact a bank to raise funds.
There are loans for legal entities and for the purpose of attracting borrowed funds. They can be used not only for the implementation of investment projects, but also for replenishment of working capital (for salaries, rent, purchase of equipment, raw materials, etc.). In the first case, organizations seek to get a one-time loan from the bank, a commodity loan, in the second - a revolving credit line or overdraft.
The most popular loan among companies is a line of credit. It is provided for a certain period (for example, for two years), and can be repaid both in equal installments and upon receipt of the required amount on the account. After repayment, the line of credit is renewed and the borrowed funds can be used again. Such loans are issued for strictly specified purposes and it will not be possible to spend them anywhere else. Its advantage is the fact that after its redemption, the accrual of interest stops.
Investment loans are issued on stricter terms. The borrower is required to have a detailed business plan, as well as the availability of own funds (usually at least 30%).
From the point of view of lending conditions, there is a distinction between collateralized and unsecured loans. The latter have become available to legal entities relatively recently, however, they differ in less favorable interest rates and often involve guarantors.
Conditions for granting loans to organizations
Lending conditions largely depend on the availability of collateral and the financial performance of the borrower. Most often, loans are approved if there is collateral. It can be a company's equipment, car, real estate. Another option is the presence of guarantors who, in the event of non-payment of the debt by the borrower, will pay for it.
Also, the company must demonstrate stable financial performance, have a good credit history and not have overdue loans. Banks often take into account the age of the founders, the time the company has been in the market (at least six months), the availability of landline telephones, and a detailed business plan.
In order to get a loan for an organization, you need to contact the bank and provide the requested package of documents. These include incorporation documents, accounting and financial statements, and other business documentation.
