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What benefits can you expect if you apply for a business loan?

 Running a company is not easy. Keeping payments on time, having inventory and even dreaming of expanding your business sometimes requires more capital than you have. This is where business loans come in, which, when done right, can have numerous advantages.

What benefits can you expect if you apply for a business loan?

Being able to borrow from banks or credit unions allows you to continue running your business when there is a temporary cash shortage. Additionally, it is possible to obtain financial financing to start your business.

Regardless of which condition you need extra and urgent resources for in your business, check out the advantages of business loans in our article.

Why should you get a business loan?

A business loan allows you to bring more funds into your business without changing the current structure in any way. These loans can be used for a number of different business reasons.

For example, when you’re starting a business , it’s usually a case of expense first, income second. If you don’t have money to invest in your business, a business loan will allow you to get through the difficult initial phase. It will allow you to buy equipment and machines, pay the salaries of the people you employ, so you can mainly focus on running your business.

There are also times when long-established companies go through difficult times due to unique circumstances. While suppliers demand payments and customers delay payments, it can be difficult to keep things running smoothly. If you take out a loan to maintain the requirements of your daily operations, you can continue running your business without damaging relationships with your suppliers or customers.

Another possibility occurs in the need to expand your business. This requires a commitment that can put severe pressure on your finances, making it difficult to continue the process. This is where business loans can really help you grow your business many times over. You will be able to acquire larger offices and more resources to serve your clients.

What are the types of loans?

When your company needs a loan, it can opt for different lines of credit, which will vary according to your needs. On the market right now are some of the following:

Working capital

Working capital is an amount aimed at the functioning of the company, that is, to maintain daily operations. Therefore, this type of loan is used to replenish stocks, purchase goods and inputs, cover administrative expenses, pay employees, pay the 13th salary, among other needs.

Fixed investment

Fixed investment includes activities aimed at the implementation, modernization and expansion of the company, in addition to the replacement of machinery, furniture, equipment, utensils, installations and civil works.

This type of loan allows you to finance the company’s fixed assets, that is, the elements that last for a long time and are aimed at the operation of the business.

Mixed investment

It is working capital intended for investments. An example of a loan for mixed investment is when the company has financed equipment and needs a certain amount (working capital) to purchase the raw materials.

This type of loan has a pre-fixed interest rate, financing is aimed at the long term and there is a grace period. Guarantees are also required, such as real estate and assets, and own resources.

Anticipation of receivables

Every company has accounts payable and receivable. The amounts receivable, also called receivables, can be offered as collateral in this type of loan.

How does the loan application work?

Before searching for the best business loan , it is important to survey the company’s total debts. This way, it will be possible to know whether it would be better to apply for credit to get your business out of the red or whether it will be necessary to ask for a loan for a negative company.

At these times, it is important to have detailed and up-to-date financial planning. This will make it easier to identify the possibilities of obtaining resources that can go beyond loans for companies.

There are different types of loans for companies provided by the main financial institutions. In general, the required documentation is:

  • ID and CPF of partners
  • Proof of income and residence of members
  • Marriage or birth certificate of partners
  • Updated and legalized documentation and property registration
  • Last six bank statements
  • Social contract or equivalent document
  • Income Tax Declaration for both individuals and companies
  • Billing statement for the last 12 months signed in advance by an accountant

The advantages of applying for a loan

As we discussed throughout the text, among the advantages of applying for a business loan is the possibility of having extra resources to boost your business. In addition, the company will be able to deduct interest expenses from Income Tax.

This way, it is possible to obtain a part of the amount paid in return. This only does not happen in cases of paying interest on equity. Another benefit is that paying the loan with a fixed interest rate can be a great option when the business is doing well and is in good financial health. This way, only the contracted amount plus interest is paid.

However, before taking out any loan, talk to your accountant , check your company’s financial health and whether it will have the strength to pay the installments. Otherwise, what could save your company may hasten its demise. Have good financial planning and deeply understand your capabilities.

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