Just starting your own business already gives us a lot of stress. Uncertain market, we are not sure if it will succeed. Will the industry we have chosen be profitable? And there is also a problem with credit. Most banks do not want to cooperate with emerging companies whose situation is uncertain. So how should we prepare and what to remember when applying for additional funds from the bank.
Banks reluctant to new companies
Why do banks not want to help young entrepreneurs, people who want to do something on their own, try to stand up on their own? Statistics are the fault, and of course reality. It is statistics that show that from 50-80% of newly opened companies collapse within two years. Where does this two-year period come from?
And this is due to the fact that for the first two years a fresh entrepreneur can take advantage of the so-called “small ZUS”. And after this time, it turns out that the entrepreneur can no longer afford, and even if he is able to pay the Social Security Institution (ZUS), it may be that they will work only for him, and some trace of life will remain. That is why financing of start-ups is so risky for banks.
New companies rarely have sufficient financial resources and do not have property that could be used as collateral for the loan. However, banks are increasingly appearing on the financial market that meet the needs of young entrepreneurs. However, only those who prepare properly for this program will be able to use it.
Correct completion of the loan application with attachments is not enough. What else should we know and how to prepare so that our chances of getting a loan increase?
The basis is a well-prepared business plan
A properly prepared business plan is one that will convince the bank that our company will not collapse immediately after the period in which we can take advantage of the “small ZUS”.
We must convince the bank which has a program for young entrepreneurs in its offer that, despite the fact that we do not have much experience in running a business, we will make every effort to ensure that neither the bank nor us lose it.
Of course, due to the fact that such a loan is usually burdened with increased risk, so the conditions under which it is granted are also less favorable. The proposed interest rate is higher than for a regular consumer loan, and the maximum loan amount that we can apply for can also be set. What will convince the bank that we know what we are doing?
A business plan is a document that should be prepared not only by start-ups. Each entrepreneur should do something like this. This document allows you to assess what profits or losses we should be prepared for.
A business plan is, above all, a thorough analysis of the market, assessment of the strengths and weaknesses of our business, orientation on the activities of competitive enterprises, indication of the target group and methods of reaching them.
Based on this, bank analysts will be able to find out how much we are prepared to conduct business, whether our business plan was prepared independently, fairly, whether we are actually oriented and know what we are doing.
On its basis, they will be able to assess whether there are chances for the implementation of this plan, and thus the repayment of the commitment. In a well-prepared business plan, we include not only planned profits, because in every venture we would not have started we also have to incur costs.
The project prepared in such a way will present us in the right light. In the eyes of financial experts, we will present ourselves as aware of responsible entrepreneurs with a concrete plan for the future.
A plus will be having a loan collateral
However, rarely, who has some specific security at the beginning of their business path. Because the best for a bank would be real estate. It is easy to price it and sell it if necessary. Let’s find out if the bank in which we want to make a commitment allows for the possibility of establishing collateral in another form. Collateral is very important for the bank.
IDEAL BANK offers a company loan for any purpose, without unnecessary certificates from the Social Insurance Institution and the Tax Office, for a period of 12 months with the possibility of renewal, interest rate: 0%, up to $ 500,000, no start costs and no commission, no costs for early repayment.
As a rule, institutions that offer loans for young entrepreneurs also prefer a personal guarantee, or a collateral that will cover tangible assets may be another option. The most important thing is to give the bank assurance that in the event of our insolvency, liabilities towards the bank will be settled.
Own contribution and credit history
It is also an important element. Not all banks will want to fully finance our ideas. Then they will expect their own contribution from us. We should also be properly prepared for this. If we have the opportunity to raise at least part of the funds to finalize our venture, then our chances of getting a loan increase.
The financial institution will check our credit history before making a decision. It is very important that we do not appear in the register of debtors. Also, when planning to start our own business, we should take care of our positive credit history in advance, not incur liabilities, which we may have a problem with.
If we already have to use financial support, let’s do it carefully. Our credit history should be impeccable, it should convince the bank of our reliability, look like it does not discourage the bank from helping us.
Whatever our financial situation, whether we have credit collateral or not, whether our credit history is okay or not, the bank will certainly check our creditworthiness. Without a doubt, bank analysts will check whether we really have no problem with paying the liability.
You should be aware that our creditworthiness will be tested in each case.
Which loan should you choose – mortgage or revolving?
Mortgage or revolving loan? Which one to choose A young entrepreneur should consider which solution he will be more interested in. It is not entirely the case that the borrower will decide on the type of loan, because the mortgage is usually granted for quite large investments and, unfortunately, requires collateral in the form of real estate.
Not every entrepreneur will be able to enjoy such a cash injection. Small enterprises – small investments. They will usually use working capital loans, which are most often used to settle current liabilities towards contractors or make purchases.
Most often, the amounts of such a loan are not very high and may often not be enough. However, this may be the only solution to stay on the market at all.
How to familiarize yourself with the bank offers?
It’s a waste of time to search for the best deals yourself. We know – “time is money”. By handing over the matter to specialists, we may already be making money at the time when we would be looking for the best proposals ourselves. A list of start-up loans for new companies is available on the websites. Let’s get acquainted with her.
One of the banks that offer “Loan for start” is uBank. This proposal is especially prepared for companies that have been on the market for no more than 6 months. The cash injection we can get is $ 10,000.
Moreover, when opening a company account with a loan, the bank will open and run it for us for free, and transfers made via this account to ZUS (Social Insurance Institution) and the Tax Office will not cost us anything. This start loan is a good solution because the interest rate is calculated only on the funds used from the loan granted.
On the other hand, for companies that have been on the market a little longer, i.e. they have been operating for over six months, uBank provided a similar solution, but the amount we can borrow is already $ 20,000. This loan is intended for those who are already prospering and want to develop their business, invest in it, and expand their business with new products.
Much higher loan amounts for companies are granted by Alior Bank. However, these solutions are provided for entrepreneurs with a slightly longer experience, over a year. This type of loan is already much more beneficial for an entrepreneur, its interest rate is already significantly lower by a longer loan period.
Whenever we have a problem with choosing the best solution for us, we can use the help of financial advisors. On the websites we can also find ready lists of the best offers. There, we can quickly compare offers without going to the bank’s website individually. It will also save us a lot of time.
The decision is not easy
Instead of helping us grow our business , making the wrong choice can pull us to the bottom. Let’s not make hasty decisions. It is very important to be or not to be. We need to think in perspective. Running a company is not only accounting books and continuous payment of liabilities.
To stay on the market, we constantly need to develop and invest in new technologies. Fortunately, we hear more and more often about the successes of newly established companies and certainly such information also influences the banks’ decision to grant them loans.
What if none of the banks wants to grant us a loan?
Are there any alternative solutions to this difficult situation? Where can we obtain funds to finance our business idea? Another solution may be to look for an investor to whom we will present our project properly, we will convince him enough to be interested in developing our idea.
A decision worth recommending will also be the use of assistance offered by business incubators – these are the institutions that aim to support entrepreneurship. Their offer is addressed mainly to start-up companies already existing or those that are just being created.
So, the bank’s refusal to grant us a loan, absolutely does not close us the gate to start our dream business. We have other options, let’s use them.