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Compare business loans

Compare business loans

As with all types of products and services, it is wise to take time to compare business loans before making a decision about which one wishes to proceed with. This way, you can get the best-rate loan based on one's company's conditions. Many entrepreneurs tend to compare the cost of the loan from a few lenders. Unfortunately, this can easily lead to problems at a later date when the self-employed person does not know how the repayment terms look and if they really were the most beneficial based on the company's situation, for example. We help companies to figure out the difference between loans and find the most beneficial solution for their business situation. The following text deals with a number of aspects that should be considered when comparing corporate loans and which we also advise our customers.

What many often overlook is that the application process looks different among different lenders. Some differentiate themselves from a smooth application process that happens online with quick answers while other more traditional creditors may be working offline. In other words, one should also compare the application process to corporate loans as the difference in time can be significant and hence also cause a difference in costs and liquidity. Other aspects to consider are related to the complexity of the application.

The time aspects that should be compared when looking for corporate loans mainly have to do with the time it takes until a decision is taken and the time it takes until the loan is paid to one's company. A rule of thumb is that the bigger the loan your business is looking for the longer it will take for the lender to make a decision about it. This has to do with the fact that creditors often have standardized decision-making models for smaller corporate loans, while larger loans must go through a credit committee (ie a committee that decides on loans paid to specific companies internally). Despite this rule of thumb, there are also big differences between different lenders. Some make a decision immediately when your application is submitted while others may take a couple of weeks before making a decision. Here, one should take into account when the company needs access to capital and among which lenders this is possible.

Another aspect to keep in mind when looking for corporate loans is how fast the loan is paid after a decision has been made. As in the decision-making process, it is different between lenders when they pay the loan. However, the difference is often less (1-7 days), why it plays a greater role for companies that want to improve their liquidity with the loan.

When looking for and comparing corporate loans, one should also take into account the complexity of an application. This is especially important for small and medium-sized companies, since they often have a lack of time as self-employed and simply can not afford to engage in a process that spends less time on actual business. One can compare the complexity of the application for corporate loans by making sure the amount of documents that a lender may require to make a decision. Most lenders request access to the company's latest financial statements. Some people also request access to a budget for the coming year and how this will be affected if the loan is granted. Other types of documents that may be required have to do with order entry, billing and payment habits among customers. Read more about the basics of financing a business here

An additional aspect to ensure is whether the lenders want to meet during a meeting to review the loan application and what the company will use the loan to, or whether the entire process is done online. Obviously, applications made entirely online require less time by the self-employed.

Number of aspects that should be considered when comparing corporate loans

Credit information check up. Who is doing it and what is it for?

How does a credit report work and how long is it left? We issue questions about how credit reports work on loans, who does it and how to use it in their own company.

Compare business loans. How do you do it and what to think about

How do you compare business loans? What should you think of? How can corporate loans differ and what impact does it have on one's company? We erase the most common pieces.

Interest rate, costs and fees for business loans

How do interest on corporate loans and business loans work? What is the difference between fixed interest rates, floating interest rates and interest rates? And what should you think of?

How does personal bail/guarantors work?

Gaining a business guarantee means that one or more people promise to repay a debt to the company if this does not pay. We sort out the most common questions about how it works with the guarantee when financing for companies.

Different needs of financing and business loans in different industries

When do you really need financing? And how do financial needs differ between different industries? Learn more about how financing for the manufacturing industry, the service sector, and companies in trade.

When looking for and comparing corporate loans, one should also take into account the complexity of an application. This is especially important for small and medium-sized companies, since they often have a lack of time as self-employed and simply can not afford to engage in a process that spends less time on actual business.

One can compare the complexity of the application for corporate loans by making sure the amount of documents that a lender may require to make a decision. Most lenders request access to the company's latest financial statements. Some people also request access to a budget for the coming year and how this will be affected if the loan is granted. Other types of documents that may be required have to do with order entry, billing and payment habits among customers.

An additional aspect to ensure is whether the lenders want to meet during a meeting to review the loan application and what the company will use the loan to, or whether the entire process is done online. Obviously, applications made entirely online require less time by the self-employed.

Other things to think about when comparing business loans

The most important piece to compare when looking at corporate loans is obviously the terms. This often differs significantly between different lenders as it is the way they differentiate their product from their competitors. The following are the most common things to keep in mind when comparing business loan deals.

The amount that a single company can borrow often differs between different lenders. Some are willing to issue loans that cover and exceed the borrowing requirement of the company, while others only want to lend to a portion of the amount claimed. Obviously, you have to put the offered loan amounts in relation to the capital requirement of one's company. If there are several assets / projects that are to be financed through the loan, you should prioritize these internally and see how the offered loan amounts look in relation to this priority.

Comparing the cost of a corporate loan may seem to be a matter of course. What many self-employed workers miss, however, is to include all charges in the cost comparison. In addition to the cost of interest, you should also take into account any setup fees, billing fees, late payment and so on. Often, you can easily do this by checking the loan's effective interest rate.

When comparing payback times among corporate loans, there are two main things to look at, as they can have a major impact on one's liquidity and finance costs.

The first of these parts is the maturity and amortization rate of the loan. A longer maturity means borrowing for a long time and vice versa. Here, on the other hand, it is important to take the rate of amortization because this often differs between different lenders. Some offer offers that the company repays the entire loan amount at the end of the maturity, while others offer a so-called straight-rate repayment (ie repaying the loan with equal amounts each month until it is fully repaid). Depending on how the maturity and rate of amortization look like, the liquidity requirement in your company will look different, so that's a very important point to keep in mind. In general, one can say that a straightforward amortization is easier to plan after the repayment occurs every month and the impact on the company's liquidity is spread over time, while full repayment at the end of the loan requires the creation of a buffer for the repayment.

Another effect of the amortization rate can be seen on the cost of the loan, as interest expense is calculated only on outstanding amounts. In other words, the absolute funding cost of a loan with straight amortization is lower than for a full repayment loan at the end of the loan. Another factor to consider when comparing corporate loans is the possibility of early repayment. Some lenders offer the opportunity to repay the entire loan before the maturity has expired without incurring any costs or having to pay interest on the remaining loan period, while others do not.

Finally, one should also compare what the lender demands on the company when it comes to security. Mixing smaller loans to companies that are not yet profitable or who do not translate into larger amounts is often a personal guarantee required. Here the company citizen can also be an option (ie another company goes into the sponsorship of the company seeking a loan). If the loan amount is higher, it may often be required that the company either leave a fixed asset as collateral or invoices as collateral.

The reason for comparing different offers based on security requirements is that there is a risk that the company will not be able to repay the loan. If this happens, the security will be used for the lender to recover his money, which in turn may have a further effect on the company. Obviously, there are a lot of things to consider when comparing corporate loans. The above are the most important parts to take into account. However, there are a lot of other things to keep in mind, which often depend on one's company's specific situation and the offers it has access to.

Business loan interest rate

Just like in private loans, a creditor usually puts an interest on corporate loans and corporate credits, which defines how much the cost will be for your company. As the interest rate determines how much your business will need to pay, it is necessary to understand what types of interest there are, how they work and how they affect your company's finances.

Normally, the interest rate is fixed (or bound as it is also called) when it comes to corporate loans to small and medium-sized companies. This means that the percentage will not change over the term of the loan or as long as agreed. In other words, the interest rate is determined until the loan is repaid alternatively during the contract period. During this period, the lender has no opportunity to change the interest rate during the loan period.The reason that corporate loans usually have fixed interest rates is that the lender makes a credit assessment on the company and possibly the owners of the company, and sets the interest rate beyond the risk that the loan will not be refunded. Since it is more difficult for lenders to make a credit assessment on companies, they want to guarantee a certain income through the loan, as they do with a fixed interest rate.

Depending on the lender and the borrower, you can get the option to tie the interest rate over a certain period of the loan's maturity. In other words, you can equate mortgage loans to the interest rate of 1 month to 10 years, for example.

Benefits wth a fixed interest rate for business loans:
  • It is easy to calculate the monthly cost you will have during the term of the loan. In other words, you can plan your costs and cash flow better
  • It is advantageous if you think the market is uncertain and that the key interest rate will go up
  • You do not have to worry about how the interest rate will evolve
Downsides with a fixed interest rate for business loans:
  • Historically, a fixed interest rate is more expensive than a variable, since it is difficult to slow down when the interest rate is low, as well as to pay a premium to tie it
  • Repaying the loan in advance may incur an additional cost (depends on the lender)

A not so common business loan variable is to have a floating rate with an interest rate ceiling. In other words, the interest rate may vary over the term of the loan, but not exceed a certain level. This gives your company some of the benefits of both variable and fixed interest rates; You can take advantage of the opportunity to get a lower interest rate and can count as well as budget for fixed cost frames. The backside of this interest rate form is that the bank usually takes a premium for it, ie paying a cost for the interest rate ceiling.

Before you ask whether you should tie your interest rate or not, you should see what opportunities your company actually has. As mentioned above, not all companies are offered a floating rate, so the question therefore becomes irrelevant. An effective way to do this is to use comparative services that contact multiple lenders simultaneously on behalf of your company.

For those companies that have the option to choose between fixed and floating rates, it is usually recommended that you bind a portion of the loan at a fixed rate and have a floating rate on the remaining loan amount. This allows you to limit your risk of the reference rate going up while giving you some flexibility and the ability to budget the borrowing costs.

No interest for the business loan?

Some corporate loans use a fee instead of an interest rate. They do this to simplify for entrepreneurs so that they know from day one what the actual cost will be and will not count on the interest rate, which depends on amount, maturity and rate of amortization.

When comparing interest-free corporate loans with loans that have an interest rate, you should always check what the actual end cost is. Here it is also worthwhile to include any other costs, such as setup fee and billing costs. We always help ours with this and ensure that the terms are transparent when we present what offers they receive.

How do the interest rate get decided?

The interest rate on corporate loans and corporate loans is usually set by a credit assessment of your company and possibly also by the owner of the company. The latter usually occurs in the case when a personal guarantee for the loan is required from the lender. In general, the credit assessment is more thorough (ie includes more information) if no personal sponsorship is made for the loan. Need more info about interest rates? Please visit global-rates.com for more info about current and historic interest rates.

The lender makes a credit assessment to determine how much the risk is that the company can not repay the loan under the loan agreement. In the process of a credit assessment, the lender usually takes out a credit report (UC and Creditsafe are two examples of companies offering credit reports) at your company. The credit report usually contains information about your company's financial results and if you had any payment remarks. In addition to a credit report, lenders usually look at the company's latest financial statements, the latest figures from the book, as well as information about what the loan will be used for and what impact it has on the company's earnings.

The interest rate can also be affected by the collateral provided by the company for the loan. If the security is a guarantee, the person's credit rating will affect the interest rate. If the security is instead a machine, a vehicle or a property, then the second-hand value of the asset will have an effect on the interest rate.

Personal bail/guarantor

Among many types of corporate loans, corporate loans, factoring and leasing agreements, a collateral commitment is a requirement for access to funding. Generally, it is more common to claim the sponsorship for financing to small companies that make a loss or a lesser profit than it is among profit-making companies with higher sales. This is because the repayment ability of the latter is considered to be sufficiently good for the creditor to be willing to take the risk of issuing financing without a guarantee. It is even more common for smaller companies to accept a guarantor commitment, as they often have greater control over the company and thus have a good idea of what commitment they make.

It is common that several issues arise among business owners when a claim is made for a collateral commitment, so we have compiled answers to many of these in this article. Want to learn more about small businesses? Click here!

Individual Business / Private Company: This type of business form is not a legal entity, and instead, the company's social security number is used as an organization number. Here, therefore, the entrepreneur is always responsible for the company's obligations (for example liabilities and agreements) and a guarantee is generally not required, since the entrepreneur is already liable for any liabilities.

Trading companies and limited companies: The company men, ie the shareholders of the company, are always personally and jointly and severally liable to third parties. This means that the entrepreneurs have a personal responsibility for the company's obligations, and that the guarantee is not required as they are already responsible for any liabilities. Solidarity's responsibility means that one of the companymen can be required for the company's entire debt. The person who has paid may then demand the other members of the company for their share of the debt.

Share company: When a limited company is a legal person, an entrepreneur is not personally responsible for the company's debts unless otherwise agreed. Hence, claims on the bail tend to arise among small limited companies with lower sales and profits. If the company makes a profit or is willing to enter another type of security, it may avoid a personal sponsorship.

Different types of bail

Simple guarantor: A simple guarantor means that the guarantor, ie the person who has assumed responsibility for the debt, assumes responsibility only when the borrower (the company) has no detachable property left. Proprieguarantee: means that the guarantor is responsible for the loan as if this were a separate debt. The lender then has the right to claim the guarantor on the debt without first requiring the company to repay the business loan / financing. If there are more guarantors, the creditor may require any of these on payment of the entire loan. The person who has paid has the right to then demand the other guarantors on their share of the debt. This also has a right of recourse to the borrower, which means that you have the right to demand the borrower (company) of the debt that you have to pay. Be smart - Don't overpay for your loan!

Generally, there are no formal requirements for how a collateral agreement will look. Usually the guarantee commitment is included in the loan agreement, where the borrower's obligations are defined. The text is called "guarantor opinion" and is signed by the guarantor. The following is an example of how such an opinion may be formulated: "For the creditors' obligations under this debt certificate, the deposit is taken as for own debt."

In situations where there are several guarantors for one and the same debt it is important to know what kind of responsibility they have. In the case of joint and several liability, the creditor may require one of the guarantors of the entire debt. This, in turn, has the right to demand remaining guarantors on their share of the debt. However, in the case of shared responsibility, a creditor may only require the respective guarantor of his share.

What to think about when taking a business loan

The current financial situation of the creditor. Be sure you have a good understanding of the company you are in the guise of and how the financial situation looks. Take a look at the financial statements (can be done via allabolag.se) and ask to see the latest figures from the book. Really think about your business and what you really need. Learn more about entrepreneurship!

Financing Result Try to make an estimate of how things will look after the company has received the funding. Will sales increase or costs to decrease? Will capacity change? If possible, try to get an idea of ​​how it will affect the company financially.

Get a good understanding of what the commitment means. Read the loan agreement carefully so that you understand how the business loan works and what your obligations are as a guarantor. If you have any questions, ask them to have all the answers before writing.

When we work with our customers to find the right financing at the best terms, we are always careful to answer any questions that arise regarding possible collateral commitments. Transparency and good understanding are the key to successful financing. Also, make sure you are seeking financing for the right reasons. Learn more!

What to think about when taking a business loan