In addition to loans taken out by people who do not run a business (the so-called consumers), national banks also offer many corporate products. The credit offer for enterprises is very diverse. A domestic company with the help of a loan can finance almost all of its expenses – from the purchase of goods to the construction of a new production hall.
The loan offer depends on the company’s size
Banks usually provide services to independent entrepreneurs and various commercial law companies (eg public companies, limited liability companies and joint-stock companies). Corporate clients are very diverse in terms of the size of their business. The banks’ loan offer must take this into account. Therefore, other corporate loan proposals are intended for:
- persons conducting sole proprietorship (independent entrepreneurs)
- companies belonging to the group of small and medium enterprises (SME)
- large domestic companies and international corporations
Most loans are taken by customers belonging to the first two categories. In the case of sole proprietorships, banks strictly observe the division between personal and company needs. Therefore, a company loan should not be used for purposes related to the customer’s private life (eg purchase of a car that will not be entered in the fixed assets register).
Prescription credit limit for liquidity problems
Many companies struggle with the lack of funds needed to finance current needs (eg purchase of raw materials or commodities). The aforementioned problem is intensified when the debtors are delaying the payment of invoices issued. The lack of a stable surplus on the bank account means that the company loses financial liquidity. In the long run, this condition is threatening to bankrupt. That is why many companies apply for a special loan to protect themselves against loss of financial liquidity.
Four credit products are used to finance the company’s current expenses:
- cash loan
- revolving loan
- overdraft facility
- credit line
The cash loan is paid once. Thanks to it, you can finance any company goal. The borrowed sum is usually repaid in several or several dozen monthly installments. Products similar to cash loans are on offer from several lenders. Loan companies usually apply liberal client assessment criteria. However, this difference has an impact on costs – non-bank loans are much more expensive than cash loans.
A working capital loan is a good choice for a company that wants to ensure access to current financing. Such a product allows you to pay money up to a renewable or non-renewable limit. The bank offering the working capital loan calculates interest taking into account the current debt. Therefore, before the end of the monthly settlement period, the enterprise may refund the borrowed amount and avoid the obligation to pay interest. The final repayment or prolongation of the debt occurs before the end of the annual working capital loan agreement.
A loan in a company account is the equivalent of a “debit”, which is often used by people who do not run a business. A company using this form of financing should pay its debt within a month. The limit associated with your account is usually much lower than for a working capital loan. However, it must be remembered that obtaining a loan in a business account does not require any formalities.
The credit limit works in a similar way to a company debit, but is not associated with a bank account. Thanks to this, each payment to the company’s account does not reduce the debt balance. It is also worth knowing that the term “credit line” is used in relation to working capital loans or overdraft facilities. Therefore, the entrepreneur should carefully check the operating principles of the proposed loan. One of the most important issues concerns revolving credit limit.
Investment loans require collateral
Companies with adequate revenues and a stable financial position can apply for an investment loan. Such a banking product is used to purchase the components of fixed assets (eg delivery vehicle or machines). Large investment loans also finance construction investments (eg construction of a production hall).
Due to the high value of investment loans, the bank carefully examines the company’s situation before granting them. The creditor’s decision is influenced by, among others financial result, value and structure of debt as well as risk assessment related to the conducted activity.
Collateral is an indispensable element of investment loans. In the case of real estate financing, the bank establishes a mortgage on the premises or plot. Loans for the purchase of movable assets (eg machines or cars) are usually secured by a pledge. The collateral mentioned may be supplemented by a blank promissory note, blocking of funds on a company account, and even assignment (ie transfer) of rights to receivables arising from the sale.