A business loan line is a useful way of paying an invoice during an unsafe period or a purchase for future sale, and thus temporary. It should not be used to pay wages or bonuses to employees. See how to use it well.
How to get a loan line? Getting a corporate line of loan requires adequate planning and preparation for the presentation of credible and sustainable records to your financial institution.
Usually, companies that have more than two years of age are easier to get a loan than those in the initial phase.
In general, lenders consider the following criteria:
- Ownership (s);
- Ability to comply with funding conditions;
- Guarantees that must cover the risks;
- Capital invested by owners;
- Economic market conditions.
Presenting a business plan or proforma will enable the loan counselor to understand the financial situation of the company, future projects and revenue that can be generated.
Pro and Contra
There are advantages and disadvantages to using the corporate lending line. It is important to note that this is a loan that has to be repaid regularly and includes certain fees and interest.
- Provides quick access to capital;
- the amount of withdrawal (without exceeding the limit) and the time of the loan are based on the discretion of the client;
- Interest rates are lower than those of loan cards;
- Allows you to avoid overspending costs in your trading account;
- Flexibility of repayment conditions.
- Management is longer and more complex;
- Risk of financial difficulty if you do not follow the costs; ∞ The interest rate may vary depending on the market;
- Interest rates may increase and create a more difficult situation for repayment of this loan.
Guarantee or not?
Depending on the financial situation of your business (solvency) and the amount of loan you are required, you will be required to guarantee your business loan line either through the assets of your business (equity, real estate, shares, customer accounts) or personal property (real estate mortgages, insurance, etc.).
The higher the risk for a financial institution, it will require collateral to cover the debt financing it will give you.