Economic development is directly dependent on business development. And for its continuous development, many businesses do not have their own resources. To this end, banking organizations offer the use of loans to legal entities. And with the help of borrowed funds, it will be possible to arrange the purchase of equipment, acquisition of real estate, etc.
Obviously, the conditions for lending legal persons endowed with its own characteristics. And the process of providing this service is strictly regulated. Therefore, if a company has a need for money, then you have to get it, you have to meet a number of requirements.
Each financial institution has its own lending rules, which may differ significantly from those of providing a similar service at another bank. Therefore, the first step to be taken is to select a bank for loans to legal entities with appropriate conditions. Once you have selected conditions that are right for your company, you can start collecting the necessary package of documents.
First, the banking organization checks the future borrower for credit history, which should be positive for known reasons. Obviously, neither bank would accept the risk of granting a large loan to a person who, under the terms of the previous agreement, had a serious delay in payments or was not repaid at all.
To this end, an assessment of the financial situation of an undertaking is made on the basis of the accounts and financial statements presented, which is a bank statement showing all types of transactions that have been carried out on the account for a certain period.
Often there are cases where the aim of the proposal is the best option of lending legal entities by a banking organization is to require the debtor to be transferred to his service. Therefore, most often the application for credit funds in your bank is the most optimal offer.
Bank loans to legal entities require the following standard conditions:
- Offering many banks for those who have an open account is an opportunity to use a short-term overdraft. Such a proposal involves regular replenishment of the account with borrowed funds allocated by the debtor for various purposes. Payment from this loan will be deducted automatically from the company account upon receipt of funds.
- Creating a credit line – considered an optimal credit product. Individual conditions are chosen for each business, so they should be discussed separately with a specialist in the credit department.
Banking organizations express their loyal customers because they are well aware of their financial reputation and business characteristics. Banks offer some businesses the use of targeted programs, under which borrowed funds can be used to purchase equipment, purchase expensive items that most often act as collateral.
Also, recently, successfully to create a program for refinancing loans opened in other banks. Approval will be guaranteed in the case of timely payment of funds for a long time. In other words, with many of the necessary conditions that are appropriate for established banking rules, you can go through the process of lending to individuals and legal entities.
Advantages and disadvantages
The indisputable advantage of lending to legal entities is:
- The ability of a legal entity to receive a really large amount of money and direct it towards business development.
- As a client of the bank in which you are applying for a loan, you can reduce the processing time of documents.
- Investment loans can be used to modernize or expand own production.
- Equally advantageous are banks offering flexible credit terms and individual repayment arrangements.
- Since the collateral can become not only the property of the business but also the property of the business owner, it is also possible to use the goods in circulation and even claims.
Disadvantages of obtaining loans by legal entities include:
- Collection of a large package of documents.
- Without collateral or guarantee, the interest rate will be significantly increased.
- Time-consuming design.
- The mortgage has a high price.
- The higher the loan amount or maturity, the more expensive the financial resources will be.
Types of loans
Banks offer different types of loans to legal entities. Each type has its own design characteristics, repayment and use. When selecting a particular type of loan product, it is useful to understand the purpose for which the borrowed funds are required. What product options can banks offer:
- Credit line – with such a loan regular replenishment of working capital. The use of these funds can be used to pay for goods (services) or finance ongoing expenses in agreements with suppliers. This type of loan is renewable or non-renewable. The interest rate is fixed or floating. The registration of such a line does not require the provision of collateral, but by providing any value the borrower will receive from the bank the opportunity to obtain a loan on more favorable and optimal terms.
- Budget Loans – Registration of these loans includes state support. Offered to companies that have signed government contracts (guarantees).
- Urgent loans – to quickly receive the required amount of cash.
- Express loans – are expensive loans because the interest in them is really high. Their advantage is the high speed of spending money to pay for any goods, components or raw materials.
- Overdrafts – this type of loan is preferred by most large companies. The advantage of such a loan is the regular replenishment of the account with borrowed funds in the required amount. The disbursement of such a loan is made at the expense of the enterprise by debiting the funds from the account in automatic mode.
The overpayment of the loan is directly dependent on the interest rate. And today the average interest rate offered by a legal entity is approximately 18% and the fact of providing collateral is not important. This interest rate may be reduced in the following cases:
- The debtor is a regular customer.
- Provision of collateral.
- Long formed a business relationship.
Requirements for debtors
When applying for a loan, each bank sets its own lending conditions for legal entities, but as regards the main points, they are the same:
- Only the business owner or entrepreneur can become an applicant. It is possible to attract a guarantor.
- The applicant must be at least 18 years of age.
- An analysis of the company’s financial activities should demonstrate a breakthrough operation of at least one year.
- The geographical distance between the company and the bank should not exceed 150 km.
- A prerequisite is the presence of positive credit history. This item is subject to a thorough review by the Banking Security Service.
- Even if the company does not meet every bank’s requirements, it can still obtain approval to receive funds. At the same time, however, under the terms of the contract, the interest rate and the loan period will be overestimated.
As mentioned above, lending legal persons in Russia will require a lot of strength and patience from the debtor. The preparation of the package of documents required for submission to the bank is time-consuming. At this stage, it is necessary to:
- Fill out a request for funds in the form of a banking organization.
- Prepare copies of the passport of the chief accountant and the business owner.
- IFTS Registration Certificate.
- Legal package of documents.
- Extract from the registry.
- When providing real estate as collateral, also submit documents.
- Package of financial documents to confirm the efficiency of the company and its stable condition.
- Contracts with various counterparties.
Each bank represents its limitations on the amount provided. The minimum amount for a loan is usually 300,000 dollars, and the maximum amount to be taken can even be 150 million dollars. The granting of a loan largely means the transfer of securities to a bank, subject to the guarantors being attracted.