If you are opening a new business, you want to expand an existing one or you simply need quick cash for your business, there are loans legal entities that can help you. There are many different types of loans available from banks, while some online lending platforms offer several types of loans without legal guarantees. The main types of loans for legal persons are small business loans, lines of credit for the legal person, financing, long term loans for business, financing for equipment, mortgage credit for legal persons and short term loans.
The Ministry of Business, Commerce, and Entrepreneurship partially supports loans to help small businesses, although loans are actually granted by online lenders and commercial banks. Government support makes rates lower because lenders are more confident they will get the money back. Small business loans can be used for almost any business purpose and have low rates and long repayment conditions, but the application process is time-consuming.
Credit to legal entities on time
With a traditional business loan, you can borrow a sum of money between 1,000 and 500,000 dollars, and repay it in the next few years. The repayment term is usually between 1 and 5 years, although there are creditors who offer another period.
The average interest rate is between 7% and 30%. Term loans can be used for any business purpose and do not require guarantees. These are based on your business credit score, average annual or monthly income and general financial status.
Credit line for business
A business credit line is comparable to a credit card but is open to businesses with lower credit ratings. You will be approved for a maximum amount of credit that you can extract whenever you need it. After you have repaid the money, you can withdraw more, only paying the interest for the borrowed money.
The funding period is short, with many companies getting approval one day. The interest rates are from 7% to 25%, and the repayment conditions are usually between 6 months and 1 year, but the exact terms vary depending on the income and credit score of your business.
Although regular business loans can be used to purchase equipment, a dedicated loan for equipment financing uses the items you buy as collateral for the loan. This type of loan has interest rates of 8% to 30% and is open to companies with low credit ratings. The loan amounts depend on the value of the equipment, up to 100% of the cost of the item, and financing usually takes several days. The repayment term is usually 5 years but varies depending on the lender.
These loans are recommended to entrepreneurs who launch a new business. Both banks and online lenders offer personal loans. They are based exclusively on personal finances. Although these loans are called personal loans, you can use them for business purposes. One thing to note is that these loans are for smaller amounts of capital (up to 40,000 EUR). If you need a large amount of money, this loan can help you, but you will need to combine it with other sources of financing.
Interest rates on personal loans range from 6% to 36%, depending on your creditor and your qualifications, and the repayment term is usually under five years. In addition to personal loans, there are other ways to use personal finance for business. For example, if you are a homeowner, you may be able to use a mortgage for legal persons for business purposes.
The best types of business loans if you need fast cash
Sometimes small business owners need quick access to capital. Whether you have an emergency or want to take advantage of a business opportunity, you may need financing in just a few hours or days. When you need a quick loan for business, here are the types of loans legal entities you need to consider:
One of the most popular types of loans you can find online and one of the fastest ways to get financing is a short-term loan. With this type of loan, you can get a certain amount of money that you pay daily or weekly for 3 to 18 months. Short-term loans have lightweight online applications and more flexible eligibility requirements. Depending on the lender you work with, you can get approval and funds on the same day you apply for the loan. But, since short-term finances are so convenient, they can become expensive. The interest rate will be higher than that of a bank loan or a personal loan.
Short-term financing is indeed a good idea for occasional loans. But you have to make sure when you evaluate this type of business loan, that the cash flow can cope with the daily payments and that you really understand the cost of the loan. You can cover the following types of expenses with a short-term legal entity credit:
- Covering occasional cash gaps
- Obtaining additional working capital
Business credit cards
Many people do not see business credit cards as a good financing method, but they should. Business credit cards provide you with an affordable way to borrow money when you need to pay expenses quickly. In addition, most credit cards offer other advantages:
- Rewards, points or money for certain purchases
- Interest rates 0%
- Protection/insurance for other things, such as travel purchases in the interest of service and car rental
Online term loans
Like a term bank loan, many online lenders offer term loans. The concept is the same: you receive a fixed amount of money and pay the installment every month for a certain period of time.
The difference is that, usually, for online loans, the repayment term is shorter. Most online term loans do not exceed five years. Also, online term loans are more expensive than bank loans. Depending on the online lender and your qualifications, the cost difference may be only a few percentage points. In other cases, the difference may be more significant. Interest rates for online term loans can range from 7% to 80%.
There are many types of business loans, and the right one for your business is ultimately limited to a number of factors. You will need to consider the credit history, the finances of your business, the age of the company and the reason why you need a loan, before narrowing your search options. After you do this, you should have only a few loan options for which you can apply, and this will bring you one step closer to obtaining the capital needed to grow your business.