Discover the best merchant cash advance of the moment to undertake- apply with Green-Touch. Compare for free and learn about everything you need to know before hiring loans for entrepreneurs. Here we explain everything you need to know before hiring them:
Who grants loans for entrepreneurs today?
Getting credit to start a business is more difficult than obtaining financing to consolidate an existing business since many banks are not willing to lend money to a self-employed person or to an entrepreneur who does not receive regular earnings. However, as self-employment is increasingly encouraged as an alternative to earn a living, there are several institutions and financial entities that can grant us a loan to undertake:
- Banking entities: some banks grant, through their foundations and social works, different loans to create and promote new companies. In order to access its financial instruments, it is not usually necessary to provide guarantees or additional guarantees, but it is necessary to present a viable business plan and the budgets of the investments that you want to make.
- Public institutions: the State, the autonomies and the city councils also grant loans for entrepreneurs, in addition to various grants and subsidies. Their financing products tend to have access conditions somewhat more flexible than banking since they aim to encourage the creation of companies to reactivate the economy and recruit staff.
- Private capital financial companies: finally, some private equity entities and financial intermediaries offer different loans that can be used to give birth and promote a new business and finance the various expenses derived from the opening.
As we can see, there are several options that we have if we want to finance the creation of our own company. However, before requesting a loan we must analyze the feasibility of our project and ensure that we can return the money in the manner agreed with the entity and on the dates established in the contract, otherwise, we could enter a spiral of indebtedness from which it would be very difficult to leave.
The business plan, the key to getting financing
In most cases, when we turn to an entity for a loan to start a business, they will ask us to present our business plan to ensure that we have a solid and solvent project. Therefore, it is essential that our business plan is complete and adjusted to reality, otherwise, we will have many more problems to obtain financing. Let’s see what are all the points that a business plan should contain:
- The presentation of the project; that is, a summary of its origin and a detailed explanation of what idea we want to carry out and what resources we will need.
- A market study in which we specify the situation of the sector in which we can operate, who our potential customers will be and what distribution channels we will use to reach them.
- The productive, commercial, communicative, price, sales and distribution strategy.
- An economic and financial analysis in which we indicate how much money we will need, the flow of expenses and expected income and what will be our investment plan.
So that the business plan for our new company is as close as possible, we can go to one of the many institutions (both public and private) dedicated to advising entrepreneurs. In that sense, we can also let ourselves be advised by the managers of the financial institution we go to.
Current aid and credits to boost companies
As we have said, there are several entities that can grant us financing to create, consolidate and expand our new business. Depending on the amount of money we need and the purpose we want to give, we can request one of the following products or aids:
- Bank microcredits: these are medium-sized loans (normally between 3,000 and 50,000 euros) granted by the social works and foundations of Spanish banks. In general, their interest is low and no additional guarantees are required since they are designed to help relatively vulnerable people (especially young people or citizens at risk of exclusion) so that they can boost their business project.
- Loans with mortgage guarantee: these products can be obtained through banks or financial intermediaries. In this case, a property acts as the only guarantee of payment, so it is not necessary to present a guarantee or provide personal guarantees. The amount of these credits to create a company is usually very high, usually 30% or 40% of the property provided as collateral.
- Lines of credit of public institutions: if we want our new business to grow, we can also contact one of the ICO or ENISA credit lines, in addition to the loans granted by the municipalities and the Autonomous Communities. Normally, to access these products we must have a minimum age of up to 6 months, have an innovative company and present a viable and detailed business plan.
- Local, regional and state subsidies: finally, if we do not want to get into debt, we can ask for one of the grants granted by different public institutions to encourage the creation of companies.
Also, many financial institutions and public institutions offer free advice to entrepreneurs who want to open a new business. For this reason, it is important that we previously have as much information as possible and different points of view to ensure that we are making the right decision.
Common features of the loans for entrepreneurs
There are many types of loans that we can use to finance the creation of a start-up or any other type of company, each with its specific conditions. However, the vast majority of these products have a series of common characteristics that are adapted to the specific needs of entrepreneurs:
- Relatively high amounts: first of all, the sum of money that we can get with a loan to undertake is usually quite high, since to create a business you have to face a large number of expenses (taxes, purchase or rental of a local, machinery, office supplies, etc.).
- Flexibility in the payment of fees: the term of the loans for entrepreneurs is usually several years and the method of reimbursement tends to be very flexible (monthly, quarterly, annual …). Likewise, many entities allow a period of total deficiency or capital to be requested in order to avoid having to pay the full amount of the fees during the first years of the business life.
- Few commissions: these credits tend to have few or no commissions, especially when the lender is the social work of a bank or the public administration.
- It is not necessary to provide endorsements: the guarantee of the loans to create businesses can be one or the other depending on the type of product and the requirements of the supplier entity, but in general, it is not usually requested that a third party endorses the operation.
These are the conditions that most of the financial products used for the creation of companies tend to have in common, but before hiring a loan to undertake, we must carefully read its terms and conditions to know how much we will pay in interest commissions and other expenses and find out how We will have to return the money.