The economic development is directly dependent on business development. And many companies lack their own resources for constant further development.
For this purpose, banking organizations offer to lend to legal entities. And with the help of external funds, it is possible to arrange the purchase of equipment, the purchase of the real estate, etc.
Features of reception
It is clear that the conditions for lending are legal to people who have their own characteristics. The procedure for providing this service is strictly regulated. If the company needs money, you have to meet a number of requirements to get it.
Each financial institution has its own lending rules, which can vary significantly from the specifics of providing a similar service to another bank. Therefore, a bank must first be selected for lending to legal entities with suitable conditions. After you have selected the conditions that are favorable for your company, you can start collecting the required document package.
First of all, the bank organization checks future borrowers for credit history, which should be positive for known reasons. It is clear that no single bank would take the risk of granting a large loan to a person who has experienced serious delays in payment or has not been repaid at all under the terms of the previous agreement.
For this purpose, an assessment of the company’s financial position is made on the basis of the bookkeeping and the annual financial statements, and an account statement lists all types of transactions that have taken place in the account during a certain period.
There are often cases where, with the aim of the proposal, the most suitable option for lending to legal entities from a banking organization is the obligation to transfer the borrower to its service agent. For this reason, it is most often the best offer to apply for credit from your bank.
Bank loans to legal entities require compliance with the following standard conditions:
- The offer of many banks for those who are open The current account offers the possibility to take out a short-term overdraft. Such a proposal involves regularly replenishing the account with borrowed funds allocated by the borrower for various purposes. This loan is paid out automatically after receipt of money from the company’s account.
- Form credit line – consider optimal credit products. Individual conditions are selected for each company and should be discussed separately with a specialist in the credit department.
Banking organizations express their loyalty to regular customers because they are aware of their financial reputation and business characteristics. Banks offer some companies the use of targeted programs that can be used to borrow funds to buy equipment and expensive items that most often serve as security.
Also recently successful in developing a loan refinancing program with other banks. Approval is guaranteed for a longer period if funds are paid in time. In other words, if you have all the necessary conditions that are appropriate for the bank rules set, you can carry out the lending process for natural and legal persons.
Advantages and disadvantages
The undeniable advantage of lending to legal entities is:
- The ability of a legal person to receive a really large amount of money and use it for business development.
- As a customer of the bank where you apply for a loan, you can shorten the processing time for documents.
- With investment credits, your own production can be modernized or expanded.
- The same advantage is that the banks offer flexible loan terms and an individual repayment scheme.
- Since collateral can become not only the property of the company but also the property of the owner of the company, it is also possible to use goods in circulation and even claims.
Disadvantages of granting loans by legal entities include:
- Collect a large package of documents.
- In the absence of collateral or guarantees, the interest rate increases significantly.
- Time-consuming design.
- Mortgages are expensive.
- The higher the loan amount or the term, the more expensive the financial resources become.
Types of lending
Banks offer various types of loans to legal entities. Each type has its own design features, repayment, and usage. When choosing a specific credit product type, it makes sense to understand the purpose for which borrowed funds are required. What product options can banks offer:
- Credit line – with the help of such a credit regular replenishment of working capital. These funds can be used for billing with suppliers to pay for goods (services) or to finance ongoing expenses. This type of lending is renewable or non-renewable. The interest rate is fixed or variable. No collateral is required to register such a line. By providing value, however, the borrower is given the opportunity by the bank to take out a loan on more favorable and optimal terms.
- Household loans – Registration of such loans is done with government support. Offered to companies that have signed government contracts (guarantees).
- Urgent Loans – for the immediate receipt of the required cash.
- Express loans – are expensive loans because the interest rates on them are very high. Your advantage is the quick spending of money for the payment of goods, components or raw materials.
- Overdrafts – this type of lending is preferred by most large companies. The convenience of such a loan is to replenish the account regularly with borrowed funds of the required amount. Such a loan is paid out at the company’s expense by automatically debiting the account.
The overpayment of a loan is directly dependent on the interest rate. And today, the average interest rate of a legal person is around 18%, and the fact that collateral is provided doesn’t matter. This interest rate can be lowered in the following cases:
- The borrower is a regular customer.
- Provision of collateral.
- Long-term business relationship.
When applying for a loan, each bank presents its own legal entity loan terms, but they are the same in terms of key points:
- Only an entrepreneur or entrepreneur can become an applicant. It is possible to get guarantors.
- The applicant must be at least 18 years old.
- Analysis of the company’s financial activities should show break-even operations of at least one year.
- The physical proximity between the company and the bank should not exceed 150 km.
- A prerequisite is a positive credit rating. This article is subject to a thorough review of the bank security service.
- Even if the company doesn’t meet all of the banking requirements, it can still get approval to receive funds. At the same time, the interest rate will be overvalued according to the terms of the agreement and the loan term will be short.
As mentioned above, loans to legal entities in Russia will require a lot of strength and patience from the borrower. Preparing the document package required for submission to the bank is time-consuming. At this point, it is necessary to:
- Complete an application for funds in the form of a bank organization.
- Prepare copies of the passports of the chief accountant and owner of the company.
- Registration certificate with the IFTS.
- Legal package of documents.
- Extract from the register.
- When you provide property as security, you also submit documents.
- A package of financial documents to confirm the effectiveness of the company and its stable condition.
- Contracts with different counterparties.
Maximum and minimum loan amount
Each bank sets its limits on prepaid amounts. The minimum amount for the issue of a loan is usually 300,000 dollars, and the maximum amount that can be received can even be 150 million dollars. Granting a loan for a large amount implies transferring valuable collateral to the bank, provided that guarantors are attracted.