Growing businesses are in constant need of new financing. If growth is sought solely through cash flow, then growth is usually very slow and, secondly, the company is constantly suffering from a cash shortage. Neither of these options sounds like a stable and good company. That is why it is worthwhile to solve the growth and momentary challenging situations with the help of debt.
Is it worth applying for a loan from a bank to a company?
The bank is the most familiar place to turn to when a company needs additional financing. Often when dealing with banks, there are a few common challenges:
- Applying for a loan is cumbersome and slow.
- Banks almost always require collateral for a loan
- Often an entrepreneur’s own property is pledged as collateral for a loan
A bank loan to a company is a good option if the company has been in business for a long time and the business has been stable and willing to grow. Banks like to finance when the risks involved in lending are really low. As you know, there are always risks to the business and they are rarely really low.
After all, there is no need for extra funding if the cash is in order and the company has plenty of capital. The absolute benefit of a bank loan is that the interest rate on a corporate loan is lower than applying for a loan from other financial institutions.
Corporate loans always have higher interest rates than mortgage loans and shorter payment terms. Often 5-10 years at maximum. When it comes to starting a business or being very growth oriented, this is when you start to hit the limits of banks’ lending capacity, but where do you want to apply for a loan?
Corporate loan for a new company
At the start of a business, it is rare for a company to have real estate that could be used as collateral for a bank corporate loan. As the new business does not have any real estate and not necessarily previous credit history, it is advisable to have a personal guarantor on the business loan (usually the entrepreneur himself). With personal guarantee you always get a lower interest rate than without a guarantor.
Even if the entrepreneur is ready to use his house as collateral, the new company may not get a loan from the bank. You can apply for a loan with private loan services, with or without collateral, and get a quick decision.
If you are borrowing from a bank or private lenders, getting a business loan for a new business is more challenging than for an older company, the interest rate is often higher and the payout time is shorter.
It is often worthwhile for a new company to apply for financing first from, for example, apply for a loan from private lenders. But if there is a realistic plan for repayment, you should fill out the application as it is not yet bound to borrow, and you may get a decision the same day.
Peer Loans for a Starting Company?
Peer-to-peer lending is provided by individual investors in a variety of services. Emotions appeal to individual investors better and therefore can be easier to obtain a loan if the business idea looks good and the repayment and return are pleasing to the investor.
On the other hand, if your business idea is good and your loan return and repayment look good, getting a business loan is also more likely for a new company.
What if a personal guarantee is not possible?
In some cases, a personal guarantee for a new company is not possible. Still, getting a loan is not impossible when you apply for an unsecured corporate loan.
Unsecured Corporate Loan
Some loan services require a personal guarantee as collateral, but some do not. Some corporate loan companies offer loans without collateral, but they may require cash flow calculations or other proof of repayment.
Thus, it is possible to obtain an unsecured business loan when you apply for the loan in the right place and you have a strong enough reason to get the loan and repay it
Applying for an online loan application does not take many minutes, so asking for and bidding on more places is always worthwhile. Completing a loan application does not yet require you to borrow from that party, so borrowing is always in your hands.
Applying for an unsecured business loan is therefore always free and risk-free. If you are not satisfied with the offer you have received, you can only reject the loan.
Private companies offering corporate loans are often faster than banks. You can even get a loan decision and money in your account the same day!
It is worth asking for a loan offer when the operation is solid and the repayment plan is realistic.
In business, there is always risk and variability from the start. An unsecured corporate loan is good especially when you need cash fast or don’t have the time or resources to apply for a loan elsewhere. Even if you pay a higher interest rate on an unsecured corporate loan, a quick loan can save the company or accelerate its growth, making the current higher interest rate of the loan less significant.
Unsecured corporate loans can also be used as collateral for more affordable secured loans.
Agreeing on payment flexibility is often cheaper with banks than with individual financial institutions. Therefore, it is worth reserving your own flexibility in the original payment plan, as special cases always come up. So make your own payment plan realistic before approving the loan.
Here’s how to apply for a loan without a collateral:
- Select a service from the table and click “Apply for a loan!”
- Record the loan amount and repayment period you need.
- Fill in the details of the company and the responsible person.
- Submit application for review.
- Accept or reject the loan offer you received.
Corporate loan interest rate
The interest rate of a corporate loan is always case-specific and is affected by, for example: creditworthiness, the nature of the business, the repayment period and the use of collateral. The better your creditworthiness and repayment ability, the lower your interest and expenses.
A traditional bank loan has a much lower interest rate and a longer repayment period due to comprehensive collateral. Often, banks’ interest charges consist of a reference rate and a bank margin.
Interest generally refers to the price of borrowed money. The interest is paid to the lender as a reward because the lender provides capital to the lender at risk. In unsecured corporate loans, the interest rate can be up to ten times higher than a few percent of a bank loan, but their purpose and the reason for taking an unsecured loan are also different.
Loan services do not have public interest rate pricing because interest rates always vary from entrepreneur to company. Find out your interest rate when you apply for a business loan and get a response to your application.
Applying for a loan is quick and it is advisable to apply for a loan in several places at the same time, because different actors put a little emphasis on different things in their loan decisions. Therefore, you will not know in advance where you will get the most advantageous offer until you have solicited several offers.
The loan offers are always different and in addition to the interest rate, it is worth looking at the flexibility of the loan repayment, the service level and the actual annual interest rate of the loan. In addition to interest, the loan may incur other fixed charges.
It’s a good idea to check and read the actual APR and loan terms each time you compare different loan offers.