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Personal lending has long been an easy and convenient tool for people. But if you try to borrow money from a bank for a small business, you will immediately find that it is a much more complicated process. So, before you go to a lender with such a request, you’ll have to start preparing in advance. And today we’re going to talk about loans for your small business and their benefits!
Lending
The foundation of lending is for banks to make sure they get their money back. It is for this purpose that they screen potential borrowers. In your case, there will be several selection criteria:
– The sustainability of your business;
– The credit history of your company or yourself and your Online Account;
– the benefit you bring to the bank (in terms of percentages and more);
– opportunity for the bank to manage risk in the loan repayment process.
The First Benefit Is Consistency and Plans for The Future
The only goal that can motivate a bank to give you a loan is the growth opportunity for your business. You can call it anything you like: investment, equipment, or working capital, as long as you can prove that the money you are pouring in will benefit your business. Prove it will have to be in the literal sense of the word on paper. This document is called a business plan and without it the bank will not consider an application.
If you have not even begun this very “plan” to make, it is time to do it. The task is simple – in specific figures to show the lender how you will earn money, how you will spend it, and what will remain to repay the loan. At the same time do not forget to specify at whose expense you will earn the money, this information will be in the marketing part of your plan.
Credit Cards Are the Backbone of Your Business
A classic case in business lending, when the bank checks the credit history of the applicant company, regardless of its size. True, in the case of business it is not so simple, many companies simply do not have such a history. On the other hand, such companies are often the firms of “one employee” who is at the same time its founder, owner and executor of orders or a salesman. But even if you have more employees, the bank will still ask about your personal credit history. And, having found something in it, discrediting you as a borrower, just refuse your company a loan. Conclusion: Ask for your credit report first, and if necessary clean it up.
Who Will Pay What
Banks make loans in order to make money on them. And any borrower is viewed precisely in terms of profitability. Business loans are almost the leaders in this regard, yielding only to extremely expensive cash consumer express loans. However, their high cost is not uniform and depends on many factors:
– The Central Bank refinancing rate, which is the basis of any interest rate;
– Type of loan;
– the length of the loan;
– quality of credit history;
– the size of the package of documents (tax and accounting statements, business plan, etc.);
– availability of collateral;
– readiness of entrepreneur to agree to additional conditions (for example, to transfer his payments to Mastercard Online Accounts of new creditor).
Almost Risk-Free Credit for Business
Of course, neither the entrepreneur nor even bank analysts are able to foresee everything. But they try, and the fruit of their efforts is the bank’s risk policy in business crediting. By the way, the proposal to transfer a current account to a creditor bank refers to these rules. In case of delinquency, the bank can take money from the account or just freeze it. This also includes the presence of a pledge or guarantor in the credit scheme. This suggests that the safest banks consider secured loans and franchise loans, where the parent company acts as a guarantor.
Why Arrange Business Credit Cards and Why Take Out Loans
Taking any research on why people apply for credit cards reveals three main motivators. And every employee who bears the proud name of credit card product manager knows them, but not everyone knows how to properly apply that knowledge.
So, the three basic needs of the customer:
1. a second wallet,
2. expense structuring,
3. for a rainy day.
And the three basic needs of the bank:
1. sale,
2. activation,
3. disposal.
With the first option everything is clear: people themselves are looking for money to expand their financial opportunities. Selling on this need is the easiest. Here you can fight for the client by the length of the grace period or the rate. And even better, if the client can choose the parameter that is important to him. In this case, all the bank’s needs are fully satisfied by such clients.
It is more complicated with option two. Let me state right away that what clients mean by structuring their spending is not the ability to view statements on cards, including online (debit cards also have this option). We’re talking here about the client’s ability to divide his cash flows: for example, to make large purchases with a debit card and small purchases with a credit card, or vice versa. If you already have a MasterCard, then I advise you to go to this site https://ocupaparana.org. Only here you will learn all the secrets and all the important information about logging into your account and all the benefits.
In this case, the credit card really satisfies the client’s needs. What about from the bank’s point of view? The sale is there, activation is there, i.e. there is an annual fee for servicing the account, hence the cost of selling the card is repaid. But in terms of further use of the card, everything is not so rosy. Clients are almost entirely sitting in the grace period, and interchange barely covers the funding, which could be used for other high-margin products (again, for those people who came to get the money themselves).
And finally, option 3. Here the scheme works: as the sale, so is the use of the card. Told customers “put the card on the shelf, your pocket will not take away,” and got what the client came home, put the card on the shelf and forgot. Of course, there is work to increase card activation, but as a rule, it does not have a tangible effect.
Bottom Line
As a result, banks concentrate entirely on working with clients who do not have enough money. In this case, the bank is selling the most valuable commodity to the client. The flip side is the quality of these clients in terms of solvency and the high-risk nature of the portfolio during socio-economic cataclysms. That’s why there are many pros of small business loans for you! However, if you still have questions, then I advise you to go to a special forum. Only here you can ask all your questions and get all the answers from experts and amateurs.
