Most companies at some time 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 one best suits the company’s needs and is flexible.
If you need financing, we tell you everything you need to know so you can decide on the best one.
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This is not a matter that should be treated lightly. It is necessary to indicate that, not only must be known what is signed but the concepts of that in which the heading is stamped.
Although this may seem contradictory, statistics show that many people are unaware of the basic terms that are handled economically and this is not an inconsequential matter since it can derive really important legal and financial consequences.
A changing reality in business financing
Business loans 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” when it comes to this issue.
Now, it should be noted that, fortunately, bank financing is not the only option available. At present, 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 to thus 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 over, these are the different alternatives you have :
- Banking entities: this is the way many companies turn when they have to apply for a loan. How long does it take to grant the loan? Depending on the age of the company as a client of the bank and, of course, the solvency of the bank, although in the best case it is a process that can take several weeks. Less and less demanding financial solvency is required, 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 performed through the Internet, which allows the process to be made faster allowing the application can be done in a very short time. On the other hand, you will be able to know the approval of the petition in a period that does not exceed 24 hours and even.
- Crowdlending financing platforms: they are entities that offer their services through a platform so that you can contact private investors who decide if they approve the loan requests you have made. These investors offer the credits depending on the level of risk and the money borrowed will be returned with interest. It is a procedure that is also done from the internet and in which within 48 hours you can have an answer.
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 rent. What is renting?
It is a process through 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 in these rentals are included maintenance costs, replacement services, insurance …
It is a highly recommended option, for example, if you need a fleet of vehicles on a temporary basis and thus avoids requesting a loan that you will have to pay back 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 that can be chosen
There are many types of financing that a company can choose and that have evolved to adapt to the needs of each. Among these options are:
- Confirming: it is a service that is offered to companies to pay in advance the invoices to suppliers and thus have liquidity, allowing, in turn, to have greater confidence and reliability by suppliers to maintain a close relationship with them. With this type of credit, companies can manage all payments, especially when there are many suppliers, allowing management to be much easier.
- Factoring: it is one of the means of financing that public entities use the most. It works like remittances. That is to say, that the company presents a document to the bank (remittance and credit identification) that comes to be like an invoice, being the financial entity who pays the invoices of the company’s clients, so that later she will pay later in a total way or in monthly installments that generate interest, which is 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: works very similar to renting because it allows you to rent machinery and pay a monthly fee for a period of 1 to 10 years, with the difference that at the end of the term you will have to buy the good. In this way, you will have low fees for an extended period and a higher final fee that will allow you to finish paying for the machinery.
As you can see, there is a multiple amounts of loans for companies that you can choose according to the type of need your business has. According to its characteristics, advantages, and disadvantages, it is convenient to go to one or the other. 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, the credit lines offered by the Good Finance can be used and can be accessed through banks. It is important to emphasize that, the capital that is received comes from public funds so that the conditions are established by the state institution. See our guide on Good Finance 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 entity that establishes the approval requirements and assumes the risks of default.
- There are two lines that provide liquidity and offer financing that promotes export activity.
Conditions to apply for this type of loans in Spain
- The company must be registered in the country.
- You 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 it is necessary to ask certain questions, for example:
- Is it really necessary?
- Can the company face the payment?
- Is it the right time to apply for a loan?
- What are the expenses that have to be paid?
- Does the company have the capacity to assume unexpected expenses?
These are issues that need to be raised and that are helpful to make the decision to apply for a loan. On the other hand, it is important not to resort to any lender, it is best to conduct a study of the type of loan that is needed and thus carefully compare the different options.