If you are an independent contractor, it may happen that you do not have enough financial resources to carry out certain projects, such as buying additional stocks or new machinery, or even remodeling and / or renovating the (d part of) your building. In fact, there are many investments within a company for which the level of equity is not always enough. After all, it is better to avoid investing if this investment would prevent the company from going after.
What is a professional loan or investment loan?
An investment loan can be defined as a loan to finance tangible, intangible or financial investments or to finance working capital. In practice, an investment loan will be a medium or long-term loan that will in any case be pre-established. A professional loan will be repaid according to a pre-defined schedule with the lender. In some cases, an enterprise may be eligible for state support, eg in the form of a bond, grant or subordinated loan.
Who contracts a professional loan or investment loan?
The target audience for a professional loan are:
- independent contractors,
- the liberal professions,
- small businesses,
- medium-sized companies
- the big enterprises.
Each company or institution can therefore apply for an investment loan, if it does not have enough equity to finance a certain investment.
What is the amount of a business loan or investment loan?
In principle, an investment loan will be contracted from a certain amount. However, the minimum amount of an investment credit can vary considerably from one lender to another. There are even lenders who make a clear distinction between:
- a modest investment loan, which can be contracted from a few thousand euros.
- a conventional investment credit, which usually relates to a higher amount.
For a subsidized investment credit, the minimum loan amount may even be lower than that of a modest investment loan and may be equivalent to a few thousand euros.
What is the term of a business loan or investment loan?
The term of a loan is the time to repay the loaned amount, as well as the interest due. However, the maturity of an investment loan, too, can vary considerably from one lender to another. Each lender can also define the term of a business loan itself: it can be equivalent to 1 month (for modest investment credits) or even 30 years. The due date also includes the period of use. In any case, the credit term will never be longer than the economic life of the loan object.
Use and repayment of a business loan or investment loan
An investment credit may be used in its entirety or may be divided into tranches. This period of use will therefore often be in the form of a credit opening. The period of use will depend on funding needs and will be less than 2 years. A usage period of 2 months is common, usually with a refund of interest every month, quarter, semester or year. In most cases, the periodicity of the debt repayment will be similar to that of the interest payment (but it will in no case be shorter) with constant repayments in each period.
You can also set a different periodicity with the lender: eg every month or quarter. In certain exceptional cases, a loan can be concluded with a relatively short duration (from 3 to 5 years) and repayment can be made at the end of the loan, if such a decision is economically justified. The first repayment of the amount lent can sometimes be postponed; the investment credit is then exempt from repayment for a certain period. This can not exceed 3 years (the period of use included) and will be included in the total duration of the professional loan.
The interest rate of a professional loan or investment loan
The interest rate applied is a nominal interest rate which will be fixed for the total duration of the investment credit and to the extent that market rates are available (maximum 20 years), or the interest rate is variable and may be modified in the meantime. However, the review periods can vary from one lender to another: there are loans with a period of 1, 2, 3 or even 5 years, but other periods are possible.
The interest rate proposed in an investment loan quote is only valid for a limited period of time (eg 60 days until the loan agreement is signed), given fluctuations in interest rates. interests in the financial markets. Interest will generally be calculated at the end of the period (month, quarter, etc.) using a “365/360” calculation.
Other fees related to the professional loan or investment loan
The fees related to a professional loan are composed of:
- other components, such as:
- the fees: a fee to analyze the loan file,
- the development of the loan agreement,
- possible guarantees,
- management fees: remuneration to collect the debt repaid and interest due,
- regular risk analysis,
- the administrative management of the loan contract,
- the reservation provision: a provision for the provision of the loan amount not yet used (a percentage of the unused amount that is invoiced each quarter).
- possibly default interest (in the event that the debt and / or interest are not repaid in due time (the interest on a cash credit will be applied to the current account, plus the excess margin).
Guarantees in the case of a professional loan or investment loan
In principle, any kind of guarantee will be accepted in the case of a professional loan. The guarantee will be defined according to:
- the risk profile of the borrower,
- of the transaction,
- of the economic situation.
The most common guarantees in the case of an investment loan are:
- the mortgage,
- the farm building,
- the mortgage mandate,
- the bond,
- the pledge of securities or funds
- a combination of the above guarantees.
Additional commitments in the case of a professional loan or investment loan
In many cases, some additional commitments will be agreed for an investment credit, such as:
- compliance with certain financial ratios by the company during the term of the investment credit (“covenants”),
- the obligation (or commitment) not to mortgage assets (or assets) in the future without the written consent of the lender,
- holding the majority of the shares by the borrower.
The benefits of a professional loan or investment loan
A professional loan offers a number of important benefits. An investment loan:
- at a fixed interest rate appropriate to the economic life of the loan object,
- is an excellent solution for a company that wants to invest without compromising the flow of cash (“cash flow”).
What is a simulation of a professional loan or investment loan?
For businesses, a business loan is an interesting way to borrow money. Yet, the investment credit should not be confused with the win-win loan. This is a type of loan, interesting in terms of taxation and financial, for individuals wishing to invest in a small or medium business, or another company. An investment loan, on the other hand, is a type of financing contracted by a company eg for the purchase of new machines, for investments in new technologies, or many other things that may allow the company to develop. Before applying for a business loan, the entrepreneur has an interest in simulating such an investment loan. This will allow the entrepreneur to get a clear and detailed idea of the opportunities for a certain loan for his business.
In order to simulate an investment loan, it will first be necessary to find a reliable lender. Most lenders often offer potential customers a simulation tool on their site.
Why first make a simulation of a business loan or investment loan?
There are several reasons for doing a preliminary simulation of an investment loan before taking out a business loan, including:
- the simulation is free,
- simulation is optional.
A potential borrower does not commit to anything by doing such a simulation: there are no traps and unexpected obligations related to this calculation tool.
On the other hand, it is true that companies often tend to underestimate the costs associated with a business loan. In most cases, investment loans are large amounts. These will logically result in high costs, but these costs are neglected in most cases. If you want to get an accurate idea of these costs, a business loan may be the ideal solution.
The information required for the simulation of a professional loan
In order to simulate an investment credit, the entrepreneur must have certain information, such as:
- the exact amount that will be needed,
- the expected repayment period of the business loan,
- possibly the interest rate of the investment loan:
- fixed rate,
- floating rate.
If you can answer all these questions, you can enter this data in the simulation tool. It will then easily calculate with what costs it will be necessary to take into account, but also the exact evolution of such costs in the future. In any case, the simulation of an investment loan can prove very interesting for every entrepreneur who intends to develop, grow or simply run his business with borrowed capital.
Today, the calculation of the costs associated with an investment loan does not take much time or effort. The time is past when one had to do all the calculations oneself taking into account a whole series of factors. Now, just look for a reliable lender on the internet and use the online simulation tool that will probably be available on its website, as more and more lenders offer this additional service to potential customers. Calculating the costs of an investment loan will not take much time. After all, lenders know all too well that an entrepreneur’s time is very valuable…