Working capital loan: characteristics. Variants of working capital loan

People running their own business know that extra cash is useful from time to time. Entrepreneurs are eager to use loans offered by banks, thanks to which it is easier for them to develop their business, pay off current liabilities in a more difficult period, or modernize their company. A popular solution is the so-called revolving loan.

Working capital loan for current needs

Working capital loan for current needs

Working capital loan is simply a loan for the current needs of the company. It is usually allocated for a short period (although this is not the rule) and the interest rate is around 10%. The loan amount is an individual matter. Higher limits are granted to companies with longer experience and those with a stronger position on the market (eg they do not have tax arrears or generate no losses). The main advantage of credit is that it is very easy to renew.

It is a very flexible product. The bank may withdraw money on a one-off basis or in installments, and the terms of repayment are set similarly. Many companies also appreciate the possibility of granting credit in a different currency.

Credit variants

Credit variants

The working capital loan can be paid out in two basic variants. The first option is a loan paid on the current account . The entrepreneur is assigned a fixed debt limit. If necessary, he simply pays money up to his level. Any subsequent payment reduces your debt. It is a very convenient solution : the entrepreneur takes money whenever he wants and does not have to undergo lengthy banking procedures every time. The second option is credit on a credit account . However, in this case the entrepreneur must present the purpose of the loan to the bank.

The owner of the company is limited by the contract with the tank and cannot spend money for anything other than the purpose specified therein. Otherwise, the bank may demand a refund or even impose a fine. Credit account loan can be a revolving and non-renewable loan. The correct use of the working capital loan will solve more than one temporary problems in the company. It also works well for its faster development.

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