Starting or maintaining a balanced business activity often requires a large amount of capital. In case of needing money A business can apply for a loan to cover the expenses he incurs. This business loan is similar to a personal loan given to individuals. But there are some peculiarities.
What can business loans finance?
Business loans help individuals who want to start an independent business activity to finance all expenses arising from this activity.
Traders, artisans, farmers, doctors, pharmacists, lawyers, accountants, and many others are eligible for this type of credit.
Financing is therefore suitable for purchasing machinery, furniture, raw materials, trucks or other commercial vehicles, etc., in addition to hardware equipment. Businesses may also need to purchase registered patents or pay licensing fees.
Of course, this financing makes sense later as well. To replace old equipment or to prepare yourself more
Businesses can also apply for this type of loan in order to have reserves to deal with certain situations in due time.
For example, raw materials can be stored when prices are lowest and when customer receivables are not yet due.
Profits are all increased because the interest on the loan is tax deductible. Therefore, it is a good idea to learn about business loans if you want to start or develop your business.
Term of financing and interest rate
When business financing is for the purchase of relatively short-lived assets, such as automobiles, computer equipment, or mechanical tools It is better to keep the repayment period for a small business equipment loan consistent with the useful life of the asset, between 2 and 5 years.
Thus, the repayment of the loan and the amortization of the tax on the object cease at the same time. You can then take out another loan to purchase the equipment you are replacing.
When talking about large investments The loan term can be 15 years.
The loan interest rate is an important element that appears in the contract. If the rate is constant The scheduled payment amount will remain the same throughout the repayment.
If it is variable or indexed The rate may decrease or increase depending on the evolution of the underlying index used.
In this case, the contract usually sets limits that cannot be exceeded up or down. The number of due days is therefore likely to change.
Different advantages of business loans
Business loans have many advantages, including:
- Possibility to borrow the total amount of the purchase excluding VAT, which is a tax that will be payable by the purchaser of the property. But it will be refunded after announcement.
- Possibility of matching the credit repayment period with tax amortization.
- Possibility of repaying the loan early.
- Possibility of tax exemption on interest paid
In this list of advantages You can add the flexibility that a banker knows how to demonstrate in front of clients the financial strength that he knows. or those who make a financial contribution to the order of 20%
For example, he may offer to not pay the due date in the case of specific circumstances and postpone it until the end of the loan. Schedules can still be adjusted so that customers can get through difficult times without worry.
Borrowers should carry insurance that covers the balance in the event of death or disability.
This insurance is not required for small loans. But the lending organization requires a large sum of money to be spent.
The creditor was unable to demand his security but did not neglect to offer it. It is standard insurance that covers all borrowers of banks who require it. Regardless of the age or health of the user, as with individual insurance.
The premium claimed is high. Therefore, it is worth asking another insurance company to find personal insurance.