Professional loan: conditions, amounts, duration and rates

Commonly called “business credit”, the professional loan is, as its name suggests, intended for professionals. If you want to learn more, read this article. See http://www.akiakmalamutes.com/direct-loan-consolidation-application-online/ for a write-up

What is professional loan?

What is professional loan?

 

The professional loan is a loan intended to produce capital, which will be used to acquire materials and equipment for the company. The professional loan aims to cover the following needs:

  • Cash requirements

They concern businesses in difficulty. Indeed, when a company no longer has enough cash (credits and having on its monthly payments) to remunerate its suppliers, employees and other creditors. Its bank balance is then negative. This is the working capital.

  • Equipment requirements

They correspond to the operating needs of a company (furniture, supplies, landscaping equipment). If the purchase of equipment is likely to endanger society (especially when its activity decreases), then it is possible to take out a professional loan.

  • Real estate needs

They group together the purchase or construction of new premises, land or warehouses. In this case, tax exemption can be applied to reduce taxes.

Please note: an entrepreneur can also apply for a professional loan in order to create a business.

Who can benefit from the professional loan?

Who can benefit from the professional loan?

 

The professional loan is allocated to professionals who often need substantial funding. They employ the majority of the working population and the income generated is sometimes limited.

  • Liberal professions (doctors, lawyers, midwives, nurses etc)
  • Craftsmen
  • Tradespeople
  • Farmers
  • Associations
  • TPE (very small companies)

Where can you take out this loan?

Where can you take out this loan?

 

It is necessary to prove by documents the professional status of the borrower with the financial institution concerned. In addition, you are not obliged to take out the loan at your original banking establishment.

Under what conditions?

Under what conditions?

 

The financial institution in charge of contracting the loan assesses the applicant’s repayment capacities (the solvency of the company). The repayment capacity is assessed according to the financial autonomy ratio (based in particular on equity), the repayment capacity ratio and the general liquidity ratio.

For this, he observes the following criteria:

  • Balance sheet
  • Operating account
  • Adequacy Report
  • Company rate of return
  • Business plan

It is strongly advised to best establish the business plan justifying the loan. The project must be clear and structured. For this, you can call on a broker who will take care of preparing the file. This will allow you to provide your request with the best conditions (saving time) to be eligible for the loan. Also, be aware that if you decide to appeal to investors, this is valued. An honor loan can also be beneficial to you.

What are the different types of loans?

What are the different types of loans?

 

We distinguish among the types of loans: traditional bank loans  and loans adapted to the needs of businesses .

Traditional bank loans:

  • The amortizable loan

It gives the possibility to a company to repay the loan contracted with monthly payments which repay both the principal and the interests. All this, over a fixed period.

  • The credit reserve

Also called “permanent credit”, it allows the company to benefit from a permanent sum of money, renewable every year.

  • Credit repurchase

It combines all debts into a single loan, with a single monthly payment and a fixed rate. Note that this type of loan generally has more advantages than loans granted to individuals.

The pests tailored to company profiles

  • Leasing

It aims to finance the assets of a company. To do this, it brings together a leasing company (a bank, for example), a credit applicant (in this case the company concerned) and an equipment supplier.

Thus, if a transport company needs an additional vehicle, it can then apply for a financial lease from the bank. Once his request was accepted, his bank bought the vehicle and rented it to the company. The latter pays a fee to the bank and is able to acquire the vehicle at the end of the loan. The sale price will then be very low.

  • Factoring

It corresponds to the transfer of management of a company’s client account to a factoring company (or factor). This will then help the company quickly recover its debts and be more flexible. There are various types of contracts: classic factoring contract, managed notified contract, etc.

  • The cash facility

It allows the company to be overdrawn for a fixed period of time in order to cover a cash flow gap. If this period exceeds 15 days, the company will then be in overdraft.

  • Bank discount 

It is a phenomenon where a company gives a commercial effect to a bank. The latter then benefits in return for a sum of money equal to the value of this commercial paper.

  • Revolving credit

Also called professional revolving credit, it designates an amount made available to the company by a lending institution.

The company can then use this amount as it wishes. It is a short term cash solution.

  • The In-Fine loan

It is the payment of credit interest and insurance at each due date. However, the capital obtained is due in full at the end of the contract. The advantage linked to this type of loan is fiscal.

  • Cash credit

It allows the company to acquire the cash necessary for its operation. It is a short-term credit.

Moreover,  the crowdlending means a form of participatory financing through a credit (including interest and guarantees) eventually paid. The company must then conduct a fundraising campaign with Internet users, on a loan platform. They are the ones who provide the funds. This process is called Peer To Business (P2B Investors).

What Are The Types Of Interest Rates Of The Professional Loan?

What Are The Types Of Interest Rates Of The Professional Loan?

 

A business loan includes an interest rate (fixed or variable rate), administration fees and insurance contributions as well as collateral fees. Among these rates are:

  • The nominal rate

It serves as the basis for calculating interest on the loan or advance.

It is determined by each bank, except for loans at regulated or subsidized rates (loans under agreement, for example). It varies according to the market rate: it is the rate at which the bank can take out a loan and includes multiple criteria (risks, workload, etc.). However, it remains insufficient to assess the amount of a loan.

  • The  TEG ( T to E ffectif G lobal)

It brings together all of the costs. It also allows for an interbank comparison.

It is calculated based on the specifics on which the loan depends: the nominal interest rate, the administration fees, and the amount of insurance. In addition, if the insurance contracted is provided by the bank granting you the loan, then its amount will be included in the TEG. However, if it is contracted in another establishment than the bank chosen for the loan, it will not appear in the TEG. In addition, the TEG is mentioned in all loan offers in France.

  • Application fees

They apply to the steps taken by the bank upon receipt of your loan request. And this, without even guaranteeing a positive response.

However, it is rare that establishments that have rejected your request require payment of the application fees. In addition, the fees depend on the nature of the funding requested: it can be proportional to the cost of the loan or fixed. To avoid unpleasant surprises, it must be included in your calculations when preparing your file.

  • Death and disability insurance

It guarantees the survival of your business as well as the repayment of the loan.

Intended to protect your heirs, the insurance reimburses the loan in their place in the event of the death of your heirs or your associates. Note that the amount of insurance depends on banks and insurers. It is valued based on the capital borrowed and the increase in the loan rate on the remaining capital.

  • Other fees

They correspond to a registration with the Registry of the Commercial Court.

This registration is required for certain professional loans (for the pledge of goodwill for example or the pledge of a vehicle in guarantee). These costs generally do not exceed a few tens of dollars.

What insurance should I turn to?

What insurance should I turn to?

 

In order to be eligible for a professional loan, it is necessary for the company to choose between borrower insurance or an individual contract.

The insurance contract can be made available to the company by the bank that grants the loan. In this case, it is a contract common to all borrowers. The amount of the insurance premium is assessed based on the average risk of all the insured.

On the other hand, an individual contract specific to the company profile can also be created. It is drawn up by an insurance delegation and is calculated according to: the age of the borrower, the desired amount, state of health, etc. In short, it is a personalized contract to reduce the cost of loan insurance.

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