What is a business loan

Business lending is the most promising area in lending. This is a service for enterprises, individual entrepreneurs, representatives of small businesses involved in the production, provision of services, in trade.

Instruction manual

1

One of the main aspects in business lending is its purpose. Banks and other credit organizations provide loans for starting and developing a business, acquiring working capital, equipment, transport, other movable and immovable property, and diversifying production.

2

Lending may be carried out by issuing a loan, a line of credit or overdraft. A loan is a one-time crediting of the amount to the borrower's account. It is most convenient if the direction of spending is known in advance, for example, the acquisition of technological equipment.

3

Unlike a loan, a line of credit is provided in tranches, i.e. parts. Here, in the process of business lending, the main aspects are the amount and duration of the line, as well as the issue limit and debt limit. A credit line is the most convenient option for those enterprises that need additional spending for a certain period of time. Overdraft is a form of lending to a current account in which a borrower receives money on it until a certain limit is reached.

4

In the process of business lending, enterprises and individual entrepreneurs are provided with long-term and short-term loans. Long-term loans are loans that are provided for a period not exceeding 5 years and aimed at the acquisition or construction of real estate, expensive equipment and machinery. Short-term loans are loans for the purchase of working capital, vehicles, and cars. They are provided for a period of less than 5 years. Some credit organizations consider short-term loans only those that are provided for a period of up to 1 year, and loans for a period of 2-5 years are considered medium-term.

5

Business lending is a rather promising area of ​​activity for banks. After all, the amount of loans is an order of magnitude higher than those provided to individuals. However, the risk associated with such transactions is high. Therefore, banks, as a rule, impose stringent requirements on their customers: the availability of equity and a steadily growing business.