There are certain things you should know before taking out a business loan. Not only to increase the chance of successful financing, but also to be able to negotiate better interest rates. Good preparation is half the battle, which is undoubtedly also for business loans.
1. What type of loan do you need?
Business loans come in many shapes and sizes. Many entrepreneurs with a credit need immediately think of a business loan where you receive the amount in one go. And gradually pays back over the term.
But there may be other loan forms that suit your financing needs much better. In addition to a regular business loan, have you also considered loan forms such as credit, factoring, leasing bridging loans or crowdfunding?
Each loan form has its own advantages and disadvantages. One is not better than the other, because they all serve a different purpose. It is important to choose the right loan form, so that you first know that you are in any case eligible, and secondly, so that you choose the loan form with the lowest costs.
2. Find out if you qualify
Good news - the options and providers are so extensive nowadays that there is almost always a financier who is willing to provide you with a business loan.
3. Map out your financing options
The question is - which lenders want to lend you money? Preferably a party with a low interest rate. But they can only communicate the interest rate that a lender charges after they have received Your company information. You can roughly calculate the interest and monthly payments , but know that you can only get really accurate percentages when a lender makes a tailor-made offer.
Unfortunately, it is impossible to do an application with all 81 financiers in the Netherlands yourself, which would take weeks. That is why it is best to use a comparison tool or a credit intermediary.
For small business credit it is best to use a comparator, which can immediately display a personalized interest rate on the basis of automatic links.
If you want to borrow a larger amount, it pays to have your business loan arranged by a credit intermediary . They work with more providers and have more options. In addition, an intermediary is able to negotiate downwards on the interest and costs of the business loan, so that you also save some on that.
Choose the right lender
Have you found some good providers that offer low interest rates? Then it is time to make a choice.
Don't just look at the interest costs, but also check the closing costs and other conditions. For example, with some providers you pay a fine if you make early repayments on the business loan.
What is important to you? Would you like to be able to make early repayments without extra costs? Do you want to repay the amount monthly, or in one go at the end of the term? What additional costs does the lender charge, such as closing costs, management costs or administration costs?
Get a good idea of the interest and the conditions. Make a decision based on those two pillars.
5. Request the business loan yourself, or have it done by a specialist?
You have to make some decisions. What kind of loan form do you want? And with which financier do you ultimately go to request your business loan?
An interest of one percentage point more or less can quickly save thousands of USD in total interest costs. It is therefore important to make a good decision. The mainstream providers are not always the cheapest. In addition, there are small specialized financiers that you usually cannot find yourself or through a comparator.
Therefore, consider whether a mediator might benefit from Your application. A broker can often negotiate better interest rates, has access to financing options that you cannot go directly to, and takes an awful lot of work off your hands.
In many cases, an intermediary is cheaper with loans from € 25,000. Do you want to borrow less? Then it is cheaper to apply for the business loan yourself.
A broker does charge costs (usually 1-2% of the loan amount), but usually saves you more than that. In addition, you can add the costs of the broker to the loan amount, so that you do not have to finance Prior to anything out of your own pocket.
6. Prepare the necessary documents
You have made a choice for a financier.
To determine how much risk the lender takes - and how much interest you will eventually pay - the lender wants to view certain documents.
Which documents these are exactly depends on Your situation and application. If you are a starting entrepreneur, your business plan and long-term financial planning are important. Are you staying part-time in paid employment? Then you may need to submit Your payslip. For existing companies, the annual accounts are usually one of the documents you must provide.
Below you can read which documents you will need for your application.
7. Business loan request from the financier
Depending on the type of financier, your business loan application is usually done in no time. If you have all the necessary documents at hand, the application is completed in 10 minutes.
And now? To wait. Until the lender comes up with an answer. That can be a Yes or a No. And in some cases, the lender will request additional documents, for example if they have doubts about your finances, your future prospects or the industry.
Many entrepreneurs ask these questions:
Am I eligible for a business loan?
Has your company existed for at least 2 years and do you have more than € 50,000 turnover per year? Then you are eligible with most financiers.
Even with bad credit or if you have no collateral, there are providers who want to lend Your money. The only point is that the interest costs will then be higher.
Do you want a business loan request as a starting entrepreneur? Then your options are limited. There are some financiers who lend money to starting entrepreneurs. In that case, expect relatively high interest costs and usually a personal guarantee. This means that you are personally liable for the debt when your company goes bankrupt.
It is not easy to get a loan as a starting entrepreneur. Having a good business plan is essential when assessing your application. In addition, lenders often look at the experience of the company. Have you had a successful business before as an entrepreneur? Then there is a greater chance that you will also succeed in making your new business a success - and so they will provide money to your new business more quickly.
What documents do I need for a business loan application?
The documents you need depend on the type of financing (micro credit or SME credit) that you are applying for and whether you are a start-up, want to take over a business or have an existing company that will last a while.
- Passport or ID card for identification
- Bank statements for the past 3 to 12 months
With loans for an existing company
- Financial statements for the past 2 to 3 years
- Balance sheet and income statement of the current year
- Income tax return (sole proprietorship) or corporate income tax return (BV) for the past 2 to 3 years
With loans for new companies
- Business plan
- Long-term financial budget
Only with some financiers
- Proof of registration with Chamber of Commerce and any licenses you need to do business in Your industry
- Copies of contracts with major suppliers and customers
- Copy of the lease of the business premises
- Overview of insurance. Depending on your company, this may include liability insurance, life insurance or, for example, flood insurance if you have a beach tent
- Personal resume including business experience
- Personal financial overview and income tax returns for the past 3 years
- For loan with collateral, proof of ownership of the collateral
- In case a down payment has to be made, proof of equity
- Franchise agreement if you borrow as a franchisee
- In the case of a business acquisition loan, a business valuation by a third party
- With a loan for a business acquisition, a letter of intent or sales agreement
The most important points when comparing and requesting a business loan
A longer term means higher interest costs.
- Loan amount
Does the lender want to finance the entire loan amount? Or do you need your own input? How big is your own contribution? And can that be financed with another provider?
As an entrepreneur you know that sometimes not everything goes according to plan. How flexible is the lender with late payments? What guarantees does the bank require? And can you also make early repayments if the business is going well?
What guarantees does the lender want to see? Do you have to provide collateral or personally guarantee the loan? Are you aware of the financial consequences if you cannot repay the loan and check how different providers deal with this.
- Convenience and speed
A loan from the bank guarantees the lowest interest, but it is anything but easy and fast. A lot of paperwork, office visits, long application times, and you may need to periodically report your business figures to the bank.
Alternative financiers are a lot easier to deal with. A business loan request is arranged in no time, there are few obstacles and contact is short lines.
Consider for you how important the interest costs are compared to a quick and easy application process . That can make a big difference for which provider you ultimately choose.