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Learn about the requirements to apply for a business loan

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Regardless of the industry in which a company is located, considering a business loan will always be a good idea given the possibility of promoting its growth or maintaining its operations in case of difficulty.

Especially in times of crisis or uncertainty, having financing becomes a key aspect for all types of organizations. However, due to a lack of knowledge about the requirements to apply for a business loan or due to not finding a suitable financial product for their needs, there are many companies that postpone the possibility of obtaining a loan, and do not take advantage of the advantages that this can mean for them. its development, especially when the economic perspectives begin to improve and GDP growth is even estimated to reach up to 7% in 2021.

Requirements to apply for a business loan

When making an application for a loan, a company will have to consider different aspects related to the documentation that it must present. This may vary depending on the bank or financial institution to which the business credit will be requested. However, some of the most common requirements are:

  • Be a formal company or natural person with business activity in the country.
  • Have a favorable background in the Credit Bureau.
  • Verify sufficient solvency to make the financing payments.
  • Demonstrate seniority in the market.
  • Submit documents, such as official identification, proof of tax status and latest account statements.

How to obtain a business credit?

  • The first step is to select and go to the preferred bank or financial institution.
  • Present the documentation requested by the entity to carry out the application process.
  • Once the bank or financial institution evaluates the credit request, if it is approved, it will be possible to go to the signing of the contract.

It should be considered that sometimes the business loans offered by traditional banks do not offer the flexibility or adequate schemes for the characteristics of each company, and for this reason, it is very important to compare the different alternatives found in the market.

Difference between loan and credit 

In principle, the objective of both is the same: that you have the money you need. However, the conditions of each one are different.

In both cases there are two parties involved. The creditor or lender, which is the financial institution that grants the money and the debtor or borrower, who is the beneficiary.

How a loan works

The creditor grants an amount, which is delivered from the first moment to the debtor and must be returned in a certain time, together with the interest generated by that amount.

Both parties agree to all the conditions of the loan: the time in which it will have to be repaid, if it will be done in installments and how much each of the payments will be.

For example, Ana requests a loan of 25,000 pesos from a bank to buy a new computer. The financial institution grants the money and at that moment she has the cash.

Ana agrees with the bank to return the money in 12 monthly installments, so each month she must cover part of the debt plus the interest generated.

And the credits?

In this case, the creditor grants a line of credit, with a limit amount, which the debtor can access at the time he deems convenient and does not have to use all the money available.

An example would be that Ana was granted a credit card with an available balance of 20,000 pesos.

She decides to buy a new phone, but she does not use all the available money, only half, so the interest and the credit payment will be only the part that she spent.

It may even be that she decides not to make immediate use of that credit and it will be available until she decides.

Main differences

  • One of the most important is that the interests of the credits are usually higher than that of the loans, so in the end you could end up paying more.
  • In loans you have the entire amount from the beginning, so if in the end you do not use it completely, you still have to pay interest on that amount, while in credits you only use the amount you need and the interest corresponds to that amount. amount.
  • The line of credit is available indefinitely, you can use it as many times as you want, as long as you have an available balance. On the other hand, the loan is for a single use, once you have finished paying you will have to do all the procedures again if you want to have it again.
  • The term to pay the credits is usually less than that of the loans.

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John Bailey
John Baileyhttps://destylers.com/biography-of-amanda-bynes/
John Bailey is an industry expert within the healthcare and gaming software landscapes. He works at Chetu Inc., Sunrise, Fla., a custom software development provider and thought-leader within the IT community. He offers commentary on changing tides within the healthcare and gaming industries.

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