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Month: January 2020

Loans for entrepreneurs

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The entrepreneurial concept is a term that is very popular in society today. And not only does it refer to young entrepreneurs who decide to bet on their own project as a job opportunity, but to undertake, it also means reinventing themselves. Many people have lost their jobs and have found a new professional development in entrepreneurship.

Loans for companies by traditional financial institutions with these years of economic crisis have become almost non-existent.

On the other hand, all those companies, regardless of their size, who have decided to break into a new market by digitizing or making any type of innovative change in their traditional business system would also be included in this concept.

How to access a Loan for Entrepreneurs?

How to access a Loan for Entrepreneurs?

In general, and due to the hostile economic environment in which we find ourselves, many official state agencies have withdrawn an important part of the funds destined for this purpose, the aid being severely cut in the form of subsidies.

On the other hand, most of the banking entities due to the uncertainty of the markets and the great risk that an entrepreneurial project implies, have hardened the requirements and conditions for the granting of loans of this style.

On the contrary, new financial tools have emerged, closely related to the web environment that they have replaced and by far the traditional financial means.

Let’s analyze some of the options …

Loans for Young Entrepreneurs

Loans for Young Entrepreneurs

Loans for young entrepreneurs are aimed at the most youthful sector of society. These profiles undoubtedly opt for new technologies, which is why Crowdfunding and Crowdlending platforms are usually one of their first options.
This trend has led to a great revolution in the international markets.

Crowdfunding: These are web platforms, in which entrepreneurs can expose their projects with all kinds of explanations images or videos, with the purpose of in a fixed period of time and with a specific objective budget, to reach the collection of the necessary amount. It is based on a system of rewards, through which the creators of the project, in exchange for the different contributions and funds they receive, send a series of prizes to the patrons who usually consist of: t-shirts, sweatshirts, posters and even the privilege of being the first to use the product or service protagonist of the campaign.

Crowdlending: It is based on the crowdfunding operating system but without using the rewards as a prize. They are known as P2P (pair to pair) loans, in which a person requests a certain amount of money to carry out an initiative. The peculiarity is that in crowdlending, there are different lenders to finance a single borrower, who once reached the objective and developed the project, will have to pay back the amount borrowed with a more attractive interest rate than that of traditional banks.
It means cost savings since all the procedures are online, avoiding bureaucracies.

Loans for Entrepreneurs without Guarantee

Loans for Entrepreneurs without Guarantee

Through any of the two options mentioned above, you can obtain loans for entrepreneurs without collateral.

There are also other alternatives such as:

Business Angels: these are private investors in search of innovative projects with a clear technological base that are committed not only to their capital but are directly involved in the initiatives contributing their knowledge and experience

Venture Capital Companies: These are companies managed by experts, who try to optimize the capital contributed by other investors, in order to assume great risks but also to achieve high returns.

Everything about interest for your business loan

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Curious how the interest rate for your business loan is determined? In this article we explain and show you how we calculate your interest rate. And: 4 tips with which you can cleverly handle the interest rate.

This is how the interest rate of your business loan with lender company is built up

This is how the interest rate of your business loan with lender company is built up

In the graph below you can see from which ingredients the interest rate of business loans at lender company is built up.

Basic interest: These are the costs for purchasing money on the money market. That is why the base rate is also referred to as the market rate.

  1. Capital costs: We must always maintain a capital buffer and incur costs for it.
  2. Margin: This is the profit that lender company makes. We invest part of the profit in the company and part of it to our shareholders.
  3. Operational costs: These are the costs for our staff, the systems, our office and other fixed costs.
  4. Risk costs: These are the costs with which we cover the risk that the loan will not be repaid. The level of the risk costs depends on the risk profile of your company.

Financial health of your company and the risk

Financial health of your company and the risk

If you borrow money, there is always the chance that you cannot pay off the loan. A financier must take this into account in order to be able to lend money and therefore charges risk costs, or risk premiums. To estimate the level of the risk costs, a financier looks at the financial health of your company. The better you are financially, the higher the chance that you will pay back the loan and the lower your risk costs.

Duration

The length of the period over which you repay the business loan, or the term, influences your interest rate. The longer the term, the higher the interest. This has to do with the prices on the money market, where the bank buys money to be able to lend. For long-term financing, inflation is taken into account, making money more expensive for such loans. This translates into a higher interest rate.

Amount of the loan amount

The more you borrow, the lower your interest rate. The bank incurs one-off costs for a loan, which are the same for each loan. With a higher loan amount, the share of those costs is smaller, so you get a lower interest rate.

Can I lower the interest rate on my business loan?

Can I lower the interest rate on my business loan?

You can lower the interest on your business loan by improving the financial health of your company. Borrowing money from a financially sound company means less risk for a financier and that often translates into a lower interest rate. Check our tips to improve your profitability, our tips to increase your solvency and our tips to increase your liquidity.

Interest tips before you apply for a loan

  • Be critical of financiers. Request different quotes and compare the conditions. Pay close attention to interest rates: do they apply per year or per month?
  • High interest? See if you can improve the financial health of your company. Please note: this improvement can only be seen one year later in your annual figures
  • Choose a shorter term: the bank charges a higher interest rate for a longer term. The disadvantage is that you have to repay faster and therefore have higher monthly payments
  • Do you compare interest? Please note that some financiers communicate an interest rate per month and others a percentage per year.