Small business loans
That small and medium enterprises in need of funds for the development of their business, not only banks are aware of the federal scale, but regional banks, many of which have already begun to implement their own credit programs in this direction. Conditions become more attractive, the procedure of registration and issuance of the loan is simplified if a few years ago, the average rate on loans to small businesses was about 30-35 per cent per annum, it currently stands at 18-22 percent. Moreover, much more diverse steel timing, amount, how to ensure repayment of loans, banks are offering new products focused primarily on the needs of the borrower and the market requirements.
Key issues for lending to small and medium businesses
One of the main problems is the poor quality and opacity of financial statements of enterprises, as well as deliberate concealment of complete information (primarily on existing debt). About half the statements do not reflect the real financial and economic condition of the company. Often, the borrower does not realize that the first and the main victim in this situation will make his own business: a significant increase in debt will worsen the financial performance of the company. While a number of banks the opportunity to practice the individual review of the financial situation of the company and the development of more flexible repayment terms of the loan.
The second problem - lack of reliable collateral. It should be noted, however, that the recent requirements to deposit becomes less strict. As collateral, banks take an apartment or houses with land and the mortgagor can act as the founder (CEO) and the third party. A number of banks began to appear as a standard credit products for this category of clients who are provided without collateral. Nevertheless, for most banks when determining the interest rate is an important factor in the liquidity provided by the borrower collateral: the liquid collateral, the loan would be cheaper.
The next problem faced by many entrepreneurs who plan to start their own business, is that not every bank will undertake a new enterprise lending. Such business in banking circles is called "start-up". Typically, the bank began its work with a client with a risk analysis and financial performance of previous years. If it is a "start-up", the potential customer is simply nothing to submit to the bank for analysis. In such situations, clients often use the bank's money without telling him about the purpose of lending, such as business leaders make out loans as individuals, ie mechanisms by means of consumer credit. For repayment of such loans they later will be forced to withdraw money from circulation and cashing them.
Another problematic step in obtaining funds for the development of business is to make high quality business plan. Before you go to the bank, the entrepreneur should explore the market segment in which it plans to operate, assess their capabilities and needs to form the most realistic and appropriate market conditions business plan. Often it is the low financial literacy of small business owners, the inability to articulate their financing needs and to represent your business produces a refusal by the bank.