If you want to get off to a good start as an entrepreneur or just go through a growth spurt, then a business loan is the way to go. But which form of financing is right for you, where can you borrow money for business purposes and how can you be prepared?
What is a business loan?
You apply for a business loan when you want to start a business, but also when you are thinking of expanding your business. For example, by purchasing business premises or large equipment. The purpose of the business loan affects the maximum amount you can borrow and the flexibility of the loan. There are several business loan options, including:
- Subordinated loan;
- Crowdfunding;
- Business mortgage loan;
- Online credit;
- Credit insurance;
- Factoring;
- Leasing;
- Sale-and-lease-back;
- Government funding.
How do you get a business loan?
In many cases, you can easily apply online for a loan from a lender, such as a bank. A digital questionnaire is used to see if you qualify for a loan. If you pass the initial test with this, additional documents are usually requested before the loan is finally granted.
Does the bank not see much future in your business plan and is your loan application rejected as a result? Not to worry; with our digital society, there are plenty of financing opportunities up for grabs.
What documents do you need to have in order?
If you look at the procedures at large banking institutions such as ING, ABN AMRO or Rabobank, they usually ask for the following documents:
- Annual figures for the last two years;
- Income tax returns for the last two years.
If you have yet to start, a well-supported business plan is absolutely essential.
This seems pretty straightforward, but as the process progresses, the information often becomes more demanding as well. Other common requirements include:
- Extract from the Chamber of Commerce;
- Proof of revenue over a longer period of time;
- Financial statements;
- Investment budget;
- Business bank account statements;
- Extract from the owner's Population Register;
- Overview of any other debts;
- Brief description of business activities;
- Interim figures/column balance sheet for the current fiscal year.
Where do you apply for business financing?
In addition to traditional financing, at banking institutions, you also have other forms of business financing. Think friends and family, as we touched on above. In addition, you have business angels: the private investors who like to invest their capital in promising businesses. These loans vary in size, but will usually start at around €50,000.
Sometimes business angels come together in a Seed fund. Such a group focuses primarily on funding innovative startups. As a startup, you can apply for funding here, but usually the money loan starts at a ton or two. In return, the fund often asks for a percentage of shares in your company, because they believe in your success.
In addition to these lenders, you also have other, perhaps lesser-known forms of financing, such as:
- SME loan;
- Private debt fund;
- Chain financing;
- Microloans;
- Stock exchange;
- Venture capital fund;
- European grants.
Roadmap for applying for business loan
There's quite a bit on your plate when you've decided it's time to scale up or expand. Hence this handy roadmap:
- First, calculate, preferably with a financieel adviseur, the amount you need to achieve your goals;
- Then make a well thought-out business plan, including all the necessary documents in the financial field. Think of the annual figures, balance sheet, financial forecast and investment budget;
- Actively search for information yourself and put various options side by side. Look carefully at the options regarding early repayment and know what term you are going for;
- Calculate the complete cost of the business loan, or better yet, have it calculated by an adviser. Not only does the total loan matter, but also the monthly charges. You are working yourself into a mess if you cannot afford the monthly amounts.
It is imperative that your records are current at all times so that your application can be reviewed. A lender wants to make sure that any loan is a good fit for your financial situation. Pay attention to the fine print so you can be sure that all laws, regulations and conditions are known to you.
