Entrepreneurs often have to resort to external financing. We checked what conditions they can count on when applying for a working capital and investment loan.
Companies willingly use external financing, especially from banking products. In addition to leasing, credit is one of the most popular types of liabilities owned by entrepreneurs. About 43 percent choose him. micro and small companies, according to data from the Association of Entrepreneurs and Employers. This situation is influenced by its availability and a wide range of types offered by banks, i.e. overdraft, loan, working capital or investment loan. However, it should be remembered that the type of financing is closely related to the purpose for which the funds will be allocated. We looked at the costs of the two most popular loans – working capital and investment.
Investment loan – costs and conditions
We would like to remind you that the investment loan is taken by entrepreneurs when they plan to develop the company , namely its expansion, purchase of specialized equipment, expansion of the fleet, increase of employment. This type of financing must be earmarked for a specific purpose that is implemented over a longer time horizon.
We asked the banks what the pricing conditions look like when applying for a loan of 50,000. PLN, for a period of 3 years, with the entrepreneur having 10 percent own contribution.
The cost of credit varies greatly. It ranges from 4,570.34 PLN to 7,116.81 PLN. Entrepreneurs have to take into account interest rate fluctuations, because each of the institutions which presented their offer bases them on the margin and Euridor rate. In addition, only one bank does not charge a commission on the loan granted – OutBank, in a variant with a higher interest rate without commission. In other banks, the entrepreneur will be charged a commission of 0.75 to 2.99 percent.
If the entrepreneur has no own contribution, he cannot count on financing at CreditCole and PB. In other institutions in the case of financing 100% loan value, the conditions do not change significantly.
It should also be noted that Meteor Bank allows financing both in the case of own or no own contribution. However, the offer is individually tailored to the client’s profile.
Working capital loan – costs and conditions
A working capital loan is usually more accessible than an investment one. Its purpose is to finance the current needs of the company, including purchase of goods, materials or settlement of current obligations towards suppliers. Thanks to it, the entrepreneur can improve his financial liquidity and avoid payment gridlocks. In addition, it is a commitment given, as a rule, for a shorter period than an investment loan, and most importantly – it does not require any own contribution.
In the case of a revolving loan, the entrepreneur must take into account costs in the amount of PLN 4,873.72 to PLN 8,200.60. Similarly to investment loans, the interest rate is based on the variable Euridor rate and the margin. However, the commission ranges from 0 to 3.50 percent.
In some banks, an entrepreneur will not take a traditional working capital loan, but only an overdraft. Bank Sapao and PB have such a solution. In their case, the loan can be repaid once at the end of the loan period, and the total cost of the loan depends on the degree of use of the funds.
Credit not for all companies
To be able to apply for a loan, an entrepreneur must fulfill a basic condition – own a company for a certain period of time. The minimum period of running a business can be an obstacle for not one company, because banks usually require 6 or 12 months , depending on the type of financing.
An additional problem may be security . While in the case of revolving loans we find banks that do not require its establishment, it is a standard requirement for investment loans. The basic security is a promissory note and power of attorney to the company account. The entrepreneur may be additionally asked to establish a mortgage on the property or a pledge on the subject of financing.
You won’t be surprised about the company bill. Well, when taking out a loan you have to reckon with the need to open a current account. Unfortunately, in return, banks are unlikely to offer a special offer or a reduction in the margin. Although cross-selling is proposed by almost all institutions, this is a catch – the conditions are set individually. This means that it is the bank that decides whether or not to offer more attractive terms to the customer. Only at OutBank the entrepreneur can be certain that if they use insurance, the bank will reduce the margin by 0.5%.
If the companies had their own funds, they would not have to use bank loans. However, not everyone is in such a comfortable position. Without financial support, many enterprises could not grow, which would mean a quick loss to the competition. Although credit is neither cheap nor the best solution, it can be the only one a company can count on. However, in order not to overpay, it is worth carefully examining the offer available on the market, especially in terms of around-credit fees, which banks are reluctant to mention.