Business Loans: Characteristics and Types

Quora News: If you have a company or are thinking of creating a new one, surely you know that one of the most common problems is finding financing. 

Business loans are sometimes unknown, especially if you are starting out in the business world. Therefore, in this article, we are going to comment on some of the loans for companies that we can request to finance our activities or buy or reform our premises, office ...

Business loans: characteristics and types

Business loans: types

Business loans are intended to finance a business and can be used as a method of financing entire projects for the medium-long term, as well as for times when we need a specific boost through external financing. We can find different types of loans for companies according to the entities that provide them, so we can obtain: loans granted by banks, as with most personal loans; On the other hand, loans for companies can also be requested from other private non-banking entities and public entities such as the ICO. Depending on the type of entity with which we contract the loan, the contracting requirements, as well as their characteristics, will be different, as we will see below.

Business loans granted by banks

These business loans have a similar operation to personal loans. On some occasions, conditions such as the interest rate are subject to the type of business for which the loan is requested, being necessary to present a project viability plan in case of requesting to finance a new company, or information on the situation current of the same in case it takes time established. 

Next, we will comment in a generalized way what the conditions of this type of loan tend to be, although of course, these will depend on the entity with which we obtain the loan and may also be subject to the possession of products such as a bank account of the company in the corresponding entity.

Interest rates on business loans may vary depending on the project presented and the bank from which we request the loan. This is not always the case, for example in  Santander's professional loan 1 | 2 | 3, it has a TIN of 6.75% (APR 7.64%). In general, the interest rate on this type of loan is usually between 4% and 9%, approximately.

The minimum and maximum financing of this type of loan will always depend on each entity. 

ICO business loans

The ICO loans are business loans made by the Official Credit Institute (ICO), this is a public entity whose main mission is to promote economic activities that contribute to the growth of the country. One of the methods they use is direct financing of companies through the aforementioned ICO loans. 

As with bank loans, to obtain an ICO loan it is necessary to present reports that demonstrate your ability to pay, in addition to explaining why the financing is requested. There are many types of ICO loans and these vary each year, although they usually share some general characteristics:

The interest rate on ICO loans can be fixed or variable and will depend on the term of the loan and the grace period.

Maximum APR with fixed or variable Interest Rate:

2.30% for a term equal to 1 year

4.00% for terms of 2 to 4 years

4.30% for terms of 5 years or more

The maximum financing of ICO loans is up to 12.5 million euros and the maximum term will be 20 years. 

Loans for companies granted by independent entities

If you do not have access to the types of financing previously mentioned, either because the conditions do not adapt to what you are looking for, or because you do not meet the requirements, for example, these entities do not accept the business project presented or do not trust of your ability to pay and they do not grant you the loan, there is always the possibility of going to other types of financing entities other than banks. 

These are entities such as Supregrupo, which offers business loans from € 10,000 to € 300,000 with a term of up to 20 years and an interest rate of 2% (from 3.90% TE). In the form of a payment guarantee, Supregrupo asks for a property free of charges as collateral or a property that has a very small charge left (that is, you are finished paying your mortgage).

One of the advantages of these independent entity loans is that the loan application process is quick and agile. The process is the following:

  • Contact Supregrupo if you are interested through its form
  • Within a maximum period of 24 hours, one of your advisors will contact you and they will carry out a feasibility study. 
  • If approved, you will receive the financing in a maximum of 7 days, which makes the process much faster than if we request financing through the ICO or through other banking entities. 

On the other hand, being an independent entity, you do not have to change banks to request the loan with Supregrupo. Another advantage that we find is that a grace period of up to 5 years can be established (a period during which you only pay interest on the loan). 

As we can see, when looking for loans for our business projects there are more options than we think and depending on the needs of the project to be financed, it will be better for us to hire our loan for companies with one type of entity or another.

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