The need for additional financing, e.g. for company development, may appear at any time. You can then take advantage of additional financial support in the form of a loan. How to apply for it and whether it’s a good idea for any business entity. We talk about all this in the article below. We invite you to read.
Loan – what is that?
The commitment of a loan should be made consciously and with full responsibility. Usually loans are granted by the bank, giving the borrower certain funds specified in the agreement on specific conditions. And the borrower within a specified period is obliged to return these funds together with the costs to which he agreed. One of the types of credit is a loan – a solution that essentially contains an important element – a pledge. This is a collateral for the bank on movable property indicated by the borrower. They can be various movables, e.g. jewelry, goods or securities etc. This type of loan is financial support usually granted to borrowers, which are business units. The movables are to secure loan repayment. If it turns out that we will not be able to pay the liability on time, the bank may legally sell items that were collateral. And because such a loan can be granted for up to 7 months (in the case of central banks) or up to 12 months (in commercial banks), i.e. relatively short, we should take into account the risk and assess whether to opt for this type of financial support.
Where to look for a loan?
When looking for the best loan, we should first consult friends who have already used such a solution. It is worth finding out whether it is convenient financing and whether the risk we incur due to the relatively short loan period will be safe for us to keep the property that we give to the bank as collateral for the loan. It is good to know the detailed conditions and analyze the offers of various banks (in the case of loans granted by commercial banks). The exact selection of a solution tailored to our needs and capabilities is the highest value that we should strive for.
How do you get a loan?
If we care about financial support for development, we should know what conditions must be met to obtain a loan. The basic ones include:
- Possession of collateral in the form of movable property that can be used to secure a loan.
- Only an enterprise can be a borrower.
- The bank will examine the value of movable property that is to constitute a pledge.
- Based on the valuation, the bank will determine the amount of credit that will be granted to the borrower.
- By completing the terms of the agreement, the bank will provide financing, thus we will become holders of the commitment in the form of a loan.
As you can see, the procedure for collecting documentation is maybe a little more complicated than for other types of loans, but the application pattern remains practically the same. Just think about which of our movables we would like to use as collateral and go to the appropriate bank to start applying.
What is the interest rate on the loan?
Interest is always a hot topic for the borrower. In the case of a loan it is 2.5%. In the history of determining the level of interest, this level has been higher. Their amount for the National Bank is determined by the Monetary Policy Council. The second element is the loan rate. This is an important issue because it means the price at which the central bank is able to grant a loan to a commercial bank against securities.
Pros and cons of the loan
Undoubtedly, additional financing such as a loan has its advantages. One of them is primarily the ability to achieve the purpose for which we make a commitment. Without him, it would certainly be impossible. Thanks to it, it is possible to develop without the need to sell, among others securities. However, the downside is the rather high interest rate on the loan as well as other costs, i.e. the valuation of the collateral and the fact that the value of the pledge may exceed the loan amount. Here we experience discomfort, because if you need to consume collateral in the absence of repayment, we lose our collateral. We should remember to consider additional financing more broadly. It is worth considering how much funds for this development we need so that when applying for a loan, you do not apply for a higher amount than necessary. And secondly, let’s carefully analyze the movables that we would like to transfer to secure the liability. Let’s estimate their value beforehand to choose the mobility that will be similar to ours in the case of official valuation.