There are many conditions for which a business is run – for example, continuous development or innovation of the enterprise. Depending on the type of business, the company uses self-financing or external financing. Few enterprises can afford to grow without additional resources.

As a result, the role of corporate lending has increased significantly in recent times. There are many forms of business financing available on the market. The availability of financial services has increased the demand for credit services in recent years. Which business loan is the best? What to pay special attention to? Answers in the article below.

Loan for companies – legal conditions

Loan for companies - legal conditions

In Poland, corporate lending is regulated by the Banking Act. There is a compendium of knowledge about types of bank loans and the requirements of credit documentation. An entrepreneur running his business as a sole proprietorship and based on simplified accounting can use revolving loans both in the current account and in the credit account intended for current business operations.

In the event of a need for investment financing, for example in the form of buying a new car or a new machine, he may use an investment loan. Depending on the type of loan, the loan period, i.e. the period for which the bank provides financing to the company, can be short – i.e. up to three years – or long, i.e. over three years.

Business loan – how to search?

Business loan - how to search?

When we know that we need additional financing, we should prepare for it. The entrepreneur can independently browse the bank offers on the market or take advantage of professional financial or banking consulting. Each of these forms has its pros and cons. Self-verification of offers often takes a lot of time, which the entrepreneur can not always afford, but is free.

There is a statement: “Don’t do something that someone will do better for you.” Sometimes it is better to entrust the search for the best offer for specialists to you, and the time saved in this way can be used for the current business of the company. Of course, using the services of financial or banking advisors involves fees for them.

Often, the costs incurred in this way are a good investment. The financial advisor will deal with the selection of the best and the most advantageous offer on the market, prepare together with us a set of required documents for the bank and negotiate the best loan price for us, i.e. its interest rate.

Required documents for a company loan

Required documents for a company loan

When we run a sole proprietorship, the set of required documents will not be too extensive. You will need the following documents:

  • Identity card of the applicant (natural person conducting business activity)

  • founding documents (e.g. extract from the Central Register and Information on Economic Activity, civil partnership agreement with annexes)

  • last PIT 36 / 36L declaration together with confirmation of submission to the tax office

  • proof of payment of tax or certificate of no arrears to the tax office and the Social Insurance Institution

  • summary of the revenue and expense ledger

  • financial forecasts required for the entire loan period

  • loan application.

After submitting the required documents, the bank will assess the company’s financial condition and decide whether to grant or not apply for funding.

Corporate loan collateral

Corporate loan collateral

All financing provided by the bank must be properly secured. Legal collateral for loan repayment can be made in many forms. Each of them has its own specific features that increase or decrease their usefulness for the needs of the bank. Let us pay attention to two groups of collateral that the bank may want to accept from us.

1. collateral in kind, which includes:

  • mortgage – it charges the debtor’s real estate with the right to claim by entry in the land and mortgage register. It gives the creditor (e.g. a bank) priority to assert his rights even after changing the owner of the property
  • registered pledges – may be established on the entrepreneur’s movable property. A registered pledge differs from a general pledge agreement in that the subject of the pledge may remain in the possession of the borrower, which is unacceptable in the case of a general pledge
  • pledge on rights – relates to transferable rights, i.e. securities, shares in companies, rights in the field of inventiveness
  • deposit – the depositor provides the bank with collateral in the form of cash, savings books and vouchers or other valuable items or money instruments
  • blocking of funds on a bank account – separation of funds on a bank account or deposits entrusted to the bank belonging to an entrepreneur or guarantor and making available to the lender at the time when outstanding claims arise
  • transfer of ownership as security – authorizes the bank to transfer the movable items (e.g. machinery, vehicles, inventory, jewelry) to cover claims under outstanding loans

2. personal collateral, which includes:

  • bank or insurance guarantee – an obligation on the bank or insurer to pay a sum of money to the lender corresponding to the amount of unpaid loan installments, interest due and costs of the proceeding if the borrower defaults on his obligations to the creditor bank. The buyer of the guarantee in this case is the borrower
  • promissory note guarantee obliging the guarantor on an equal footing with the issuer of a promissory note to repay the loan agreed on payment dates
  • surety under civil law – the guarantor undertakes to repay the loan should the borrower evade his obligations
  • assignment of claims – as collateral for a loan, this is an agreement between the entrepreneur and the bank granting the loan, pursuant to which the entrepreneur transfers to the bank his right to receive a specific sum for goods or services sold
  • joining a credit debt – a current borrower – a third party joins the debtor as a joint and several debtor
  • power of attorney to dispose of funds on the company’s bank accounts – it may be granted by a borrower or a third party
  • blank promissory note – a document containing the signature of the promissory note issuer, but does not specify the bill amount and the due date. As an independent collateral for the loan, it is accepted from borrowers who are well-known to a bank with good economic and financial standing
  • declaration of submission to enforcement pursuant to art. 777 of the Code of Civil Procedure – accepted interchangeably with a blank promissory note, most often used for large credit exposures, may relate to the payment of a sum of money or the issue of goods.

Depending on the type of loan and its purpose, it can be a loan secured with one or several collateral. There are unsecured loans – this is often due to the very good financial condition of the entrepreneur, long-term cooperation with the bank and the type of loan product. Regardless of the amount of security, we must also pay attention to their costs.

Let’s choose the ones that are the most advantageous for us, but also really cheap. For example, the cost of establishing a mortgage on our property is USD 200. The amount of the pledge’s entry in the pledge register is similar – it also costs USD 200.

Personal security is usually free of charge, such as a power of attorney to bank accounts or issuing a blank promissory note. Receiving declarations of submission to enforcement from borrowers pursuant to art. Very favorable for the bank and quick in execution, and recently quite popular. However, the cost of such security ranges from several hundred to several thousand USD.

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