Spain has been characterized in recent years (especially before the crisis) to be a constant factory of new companies, which begin to walk the path of business almost always with a loan, whether family or the lines of credit offered by banks and savings banks.
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These companies also have state credit lines offered by the Official Credit Institute. These are the so-called ICO Loans, very named and at the same time very used. But let’s see what is behind all credit, especially behind bank loans for companies.
First of all, getting into debt with a bank means committing yourself for a while – which is usually quite long – to regularly paying a fee. If the business is going well, then nothing, but if the business goes wrong, you will have to continue paying the same, so, first of all, it is convenient to think about how those obligations will be dealt with in the worst case.
Incurring a non-payment has serious consequences: closure of bank accounts, being fastened as a debtor on the lists of defaulters, auctioning of property and even imprisonment if a scam is shown. For this reason, one must be very aware of the credit that will be taken.
In this sense, the financial institution will give us, if you can say so, a hand since it will take care of evaluating how feasible it is that it can face the installments, for which it must present its business plan and the guarantees that they request.
Bank loans, regardless of who grants them, always have the same components that must be evaluated when selecting a loan:
- Requirements: the granting may be conditioned to various conditions that the user must meet, for example, have been x number of years inactivity as self-employed, or belonging to a certain industrial sector, etc.
- Destination: sometimes they are loans for any purpose, but other times they can have a pre-established destination, such as the purchase of capital goods or participation in international fairs.
- Term: the term will determine how high or low the loan installment will be.
- Amortization: it can be the French system, the German system, the American system, increasing, decreasing, constant …
- Period of Grace: it has to do with when the loan will begin to be paid, within, for example, 6 months or instantaneously.
- Interest: will determine the true cost of the loan. To compare the interest rate, always use the APR, Annual Equivalent Rate, which is what you will pay effectively.
- Guarantees: the bank can ask for guarantees that your money is returned. You can request a mortgage, personal property, one or several guarantors.
If they give you a loan for your venture, you can surely begin to realize your dream, and if your intuitions and projections are checked in reality, the credit will be paid alone. That is our greatest wish for you.
Financing methods for SMEs and the self-employed
Financial entities have a wide range of financial services designed for those who want to start a new business project. Loans or credit cards for self-employed workers and SMEs are some examples, but above all, and since the financial crisis that is still plaguing us began, there are 5 financing alternatives most used at this time:
- Mutual guarantee societies.
- Express Loans
- Risk capital.
- Participative loans.
- ICO Loans
Mutual guarantee societies
It is a limited liability organization whose purpose is to guarantee its own partners, as well as to help them with financial and economic advice. An SGR has two types of partners:
- Participating partners: SMEs and freelancers who contract the services of the SGR fulfilling their conditions.
- Protective partners: Those people or companies that contribute social capital to the fund of the SGR so that it can be used by the participating partners.
One crucial aspect must be highlighted: you can not participate as a protective and participatory partner at the same time.
The SGR has a series of limitations by law:
- A maximum of 5% guarantees to the same partner participating in the total value of the fund of the SGR.
- A maximum of 25% of the total value of the fund in obligations to the same creditor.
- It is prohibited to grant credits to its members and can not carry out other activities, beyond those of its corporate purpose.
These are the requirements to request a Reciprocal Guarantee Society are:
- Be an associate of an SGR, by paying a social fee
- Present a document explaining the purpose of the money you request along with a risk analysis.
The alternative is being used more and more by entities such as Home Page deansapp.com/what-is-behind-your-debt-shield-program/ Deansapp, offering fast financing from an online platform. These loans in the form of a line of credit and based on monthly income.
This financial option follows the following procedure:
- Connect your bank accounts: so that the entity has the necessary information to give you the money you must connect your online accounts of the company and the quarterly IVA settlement.
- Apply for the credit: with the help of an algorithm, you can calculate how much money you can receive from the credit line and minutes later you will be answered. Remember that you only pay for the money you use.
It is a financial service more oriented to Startups than to freelancers. They are funds dedicated to companies with high future perspectives of high profitability, finance them and provide help for their management
They offer two modalities:
- Venture Capital: Consists of the taking of temporary and minority interests in an SME during the startup or growth process.
- Private Equity: Consists of the creation of a portfolio of shares of unlisted companies.
It is characterized because the benefits of the applicant company are shared with the lender, apart from a charge based on a fixed interest. Intended for both self-employed and companies.
Its main features are:
- Its maturity is long term.
- The interest depends on the evolution of the company’s profits.
- They can be canceled in advance but if they are compensated with a capital increase equal to the capital of the company. So the company does not decapitalize.
- Interest from the loan can be deducted in the tax base of the borrower’s Corporate Tax.
- The amount of money they lend ranges between € 100.00 and € 1,000,000.
It is necessary to fulfill a series of requirements:
- Be an SME
- Document the project model demonstrating its viability and its management capacity.
- The business project can not belong to the financial or real estate sector.
- The company’s accounts must be audited.
- Have a healthy economic situation.
They are achieved through the Official Credit Institute is another important financing alternative. Some of its advantages are:
- The repayment terms are longer.
- They have lower interest rates.
These loans can be requested directly from the financial entities attached to the Official Credit Institute or directly to the ICO. They have 3 types of open lines:
- ICO Line of Businesses and Entrepreneurs 2015: financing for SMEs and self-employed people who operate in Spain and have financing needs.
- ICO Line Guarantee SGR SAECA 2015: financing for freelancers and public and private entities with the endorsement of a Reciprocal Guarantee Society (SGR).
- ICO Internationalization 2015 Line and 2015 Exporters Line: financing for self-employed workers and companies with investment projects in the foreign market.