Lately in Spain, SME credit is very difficult to achieve because banks and savings banks have limited SME loans in 2012 and 2013 very much, although little by little they are opening the tap for business financing. The real estate boom where credit was cheap and abundant is now a thing of the past.
Nowadays loans to companies and SMEs are difficult to obtain, especially for small companies more than for medium ones. Precisely the lack of SME credit has made smaller businesses have to close to have very few financing solutions at their fingertips.
Not to mention the low number of private capital and own funds with which they carry out their activity, so they are very solvent companies to which no bank wants to give financing. Some banks like FCA seem to be offering SME loans, but for medinas more than for large ones.
And given the few bank loans for companies, the best option is to seek financing using an online comparator, which in addition to time will save us many trips and money. When comparing the conditions of many SME loans from different entities and credit companies. Especially the offer of the latter have grown a lot in recent years, precisely thanks to the limitations of bank credit. For what they have entered to give financing to companies that otherwise would not have been able to get any kind of help or financial solution.
The best loans to start a business
Most of the mypes manage to stay in the market thanks to the loans for a new company. Because having money allows you to survive during the first year, which is the period in which most businesses end up closing. That is why it is essential that entrepreneurs who are going to start new companies can have loans for entrepreneurs. And more so today, many unemployed people start setting up a business so they can have a job, even with their own company.
Although many of them only have unemployment benefit in the form of capitalization as the main source of financing. But that amount of money is usually not enough, hence it is thought of loans for new companies, and although they try the entrepreneurs have very difficult to get money in banks such as Creditender, FCA, Bankiat, or Bankate. Although there are some banks that are creating specific financing lines for entrepreneurs and startups such as loans to set up business of Bank Sowell.
But many entrepreneurs, especially the unemployed, have to resort to loans for businesses that require guarantees such as guarantees or mortgages. And is that giving money for business that does not have a year in the market is very risky. That’s why SMEs get more financing the more years they have experience and seniority in the market. And so the statistics say, because loans for SMEs less than a year are almost nonexistent. At least in terms of bank financing. That is why entrepreneurs have to resort to alternative financial solutions such as personal loans from private online credit companies.
They are companies that are willing to lend money to small businesses of recent creation. So unlike new business loans offered by banks in exchange for delivering a lot of paperwork, such as business plans, balance sheets, result accounts, cash flows, etc.
Credits for SMEs without endorsement
Credit policies are one of the preferred financing formulas for SMEs. But after the real estate crisis many banks decided not to renew the credit policies they had granted with small and medium enterprises. So many had to close after the impossibility of returning their short-term loans to finance circulating.
Hence, many SMEs have decided to ask for loans without endorsement, that is to say those that, due to the low amount of money they imply, can be obtained without personal guarantees. And although it seems impossible to get money in an SME without endorsement from partners, or without a mortgage. The truth is that it is a type of SME financing that can be achieved. Now we must know how to ask for money in the case of loans for companies without endorsement. The problem is that getting a loan for entrepreneurs is a difficult thing, as well as for those SMEs that have some kind of non-payment in lists of defaulters such as RAI, because they are a type of client with a lot of risk.
Having no prior experience in business management loans to open a business, are difficult to get without collateral. Do not forget that most new businesses end up closing in less than 12 months. And many times it is due to a lack of private capital financing, that is to say that they borrow too much to pay for the investments and expenses involved in starting a business.
And after not getting enough customers, many entrepreneurs have to end up asking for personal loans of less than 3000 euros without endorsement. Because for amounts of more than 6000 euros the normal thing is that you have to provide personal guarantees and you can not get money with credits for a company without a guarantee. Hence, many SMEs, especially the smaller ones, have to resort to loans for individuals instead of borrowing to start a business or for small businesses. With the arrival in the financial market of the mini credits, nowadays it is easier to request money from a particular lender than from a bank or a cashier. And although being very short term financing, less than 30 days, it is not the most appropriate for an SME, however small it may be, it allows the self-employed and micro companies to have a small capital of money to face some of the Initial expenses through these loans to create a business.
How to get SME financing
Financing is a key part to be able to open and maintain a business. Every company needs money to pay expenses and make the investments that the operation of the business requires. And sometimes the financing of companies is aimed at urgent situations, where there is no money to pay short debts, such as payroll and supplier invoices. It is in these cases where the company has serious problems of treasury that can lead to bankruptcy to be able to refinance the debts, or even in the most complicated situations to go bankrupt.
Hence, in those cases, whether due to an economic or sectoral crisis, it is necessary to resort to loans for companies in crisis. The problem is that it is a type of financing for SMEs that is very difficult to obtain, given that banks do not usually lend money to a company with economic losses and that they have an excess of indebtedness in their balance. In addition loans for companies in crisis are usually of a high amount, sometimes of more than 50000 euros, depending on the situation of the SME. And many times that amount of money or even higher, is not enough to revive the company.
Hence, the best solution is usually to give access to private capital, that is, to a financial or capitalist partner, who provides enough money to clean up the company. Unfortunately the financing of companies through their own funds, that is to say capital contributed by the partners, is very rare and of very low amounts of money, which is why many times they resort to urgent loans for companies that need money already.
Even more so when the minimum legal capital stock in a limited liability company, the legal form preferred by most Spanish SMEs, is only 3000 euros. A figure that twenty years ago could have a certain size, but that today has been totally insufficient in order to finance without bank loans or loans a company.
Hence, many SMEs have excessive debt that ultimately leads to high interest and financial expenses that end up ballasting their income accounts. When the credit for companies was easy to obtain, many SMEs resorted to it without taking into account that later the payment of interest would end up strangulating their finances.
The problem is not that many small and mostly autonomous businesses turn to SME credit, because this is usually a form of long-term financing to undertake investments. But the so-called foreign financing, say debts with banks for loans or suppliers for purchases and services, increases the risk of bankruptcy of the business when the debt exceeds 90%. And even more so when very few companies have a capital figure of more than 7000 euros.
What makes SMEs work with a working capital, ie a financial cushion, negative to have a large debt because of business loans. No matter the form or type of these credits, normally in all Spanish SMEs we find financing through: the discount of bank promissory notes, because it is a very short-term financing and based on anticipating the money of the credits documented in bills of exchange and other commercial effects with customers, something very common in sectors such as industry or construction; the credit policy, a type of financing of companies that allows to have money for the current expenses of the business; the leasing or financial leasing that allows to finance little by little investments besides the corresponding VAT; and credit lines or loans, which have special conditions to be financed by the Official Credit Institute, which are widely used to finance investments in fixed assets. Finally, also as SME financing, we find the so-called mortgages and they really are mortgage loans for companies.
This type of financing for companies has a characteristic, and that is that the mortgage is a real guarantee that is formalized on a property, for example a local or a business premises. What makes loans for small companies sometimes limited, since they do not usually have real estate in the name of the business. Different is the case of self-employed or individual entrepreneurs, because in these cases it is normal that they offer as a guarantee of the SME mortgage loan their own home.
Although that allows them to obtain a larger amount of money, especially if we are talking about loans to start a business, the truth is that the risk of losing everything, business and housing, makes many self-employed not decide for this type of business loans.
loans for SMEs and companies
The is a type of public financing, although to grant its money to SMEs through the different financing lines available, it uses the network of offices of banks and private funds. So despite being state funding does not act as a real public financing to depend on the decision of banks to get the money from the loan for business.
The great advantage of the loans is that they really are a type of financing for SMEs, that is to say that in addition to the medium ones there are also credits for small companies. Since the loan has different lines such as exporters, internationalization, innovation, and the most recent liquidity loans. Precisely these last ones are destined to finance circulating, that is to say current expenses and payments to suppliers and workers. A type of financing very similar to the almost disappeared credit policies, and that allow many small businesses can get to have some type of financing companies for others. Hence, loans for the self-employed is almost the only way to obtain liquidity for the operation of the business. But in addition to keeping business afloat, credits are encouraging companies to launch abroad to seek new markets and to invest in research and development (R & D + i) in order to be more competitive in the market as well as to encourage the development of more technological companies that diversify and regenerate the traditional world of SMEs. That is why today we see many technological companies, startups of entrepreneurs, or spinoffs of universities, which are taking advantage of innovation loans. Thus, not only the Official Credit Institute has become an aid for financing loans for the self-employed. It has also become a financial solution for innovative SMEs.
Because traditionally the main use of money was to finance investments such as vans and other types of industrial vehicles, hence there would be a great demand for loans for self-employed workers instead of larger SMEs.
How to refinance a company’s loans
Many times the problems of credit in companies and SMEs are not in getting the necessary financing, but in being able to pay it. Sometimes the high indebtedness along with the monthly terms of return of the capital plus the interests, end up suffocating the SMEs.
In cases of quick loans companies of all kinds end up signing conditions that eventually become unsustainable, and that is why we hire a loan in bad conditions, for a high APR or for a return period that does not fit our needs , ends up being a heavy financial burden very difficult to carry. Not to mention those SME loans that have additional guarantees, as is the case of those that have partner guarantees or even mortgages on the company’s property or the partners’ homes. In those cases, the default of the SME loan is not an option. So the best solution is to recapitalize the business by contributing its own capital through a financial partner in order to reduce the excess of debts and avoid the non-payment of the credit, especially if it is banking.
The problem is that usually the partners of a company in crisis do not have enough money to recapitalize the business, hence the most typical solution is to refinance the debts. In addition, you can reduce monthly payments, either by refinancing the interest rate or by lengthening the repayment terms of the business loans. After all, refinancing debts is that, lengthening the terms or reducing the interest burden to make the monthly installments more bearable. Among the solutions, a typical one is to include periods of lack of capital amortization, that is, a period that can reach a maximum of 24 months and during which nothing more than interest is paid. It is a good way to save time and reduce monthly payments but in the long run means paying many more interest by not allocating any money from the monthly installments to the payment of the SME loan debt.
To be able to successfully refinance debts, it is normal to have to resort to collateral such as re-mortgages, that is to say that the majority of debt refinances consist in applying for a mortgage loan for companies whose amount allows to pay for all personal loans, credit cards, and policies. of existing credit. This way, several SME loans are converted into a single loan with better conditions in terms of repayment term and interest rate. Normally, in any debt refinancing process, many commission and study expenses are generated, which are usually included in the amount of the SME loan.
The car pawn new financing for SMEs
Until a few years ago, SMEs had to resort to loans for a business when they needed money for their activity. So the most typical was to resort to credits for FCA companies or other banks such as Santander. But today SMEs have a new financing formula, not traditional and therefore far from the options of banks. It is a financing for companies through the commitment of cars. A financial solution that allows to obtain money in SMEs that have a valuable or numerous fleet of vehicles. Something not very common because to finance the purchase of vehicles has been resorting historically to renting, ie to rent, rather than to loans for small and medium enterprises. Since industrial vehicles usually have a shorter lifespan.
But still there are companies that may have financed their cars and company vehicles with a lease and therefore have ownership of them. These SMEs can resort to the commitment of cars and trucks, ie get money for your vehicle while driving and use it in your business. A good way to get SME financing, for which you simply have to value the vehicle with a valuation made by the car pawn company. And depending on the result of the valuation, you will receive money as if it were a quick loan companies or the traditional credit company. But all without additional guarantees and without complex economic and financial studies on the business.
That is to say that the commitment of cars is like business loans for SMEs but without paperwork or endorsement. When granting the credit with the only guarantee of the truck, car, or industrial vehicle.