Lending is one of the important instruments of state policy for the development of small business. In the event that individual entrepreneurs need funds for the development of business activities, they can apply to various funds, which have now been created a lot, as well as banks to obtain a loan. But it should be noted that this type of lending has some features.
First, you should pay attention to the fact that, as a rule, the rates on such loans are higher than the rates on consumer loans we are used to.
Secondly, loans for IPs take much longer and with a more careful attitude to the study of documents submitted by the applicant. This is because lending funds and banks attribute small business lending to activities with an increased level of economic risks.
Thirdly, in order to get a loan, an individual entrepreneur will have to draw up and submit to the lending institution a much larger package of documents than, for example, in the case of consumer credit.
The amount of the loan amount that an individual entrepreneur can count on will be determined individually by each bank, and this depends on a number of circumstances, the main of which are:
- whether the applicant is serviced by this bank;
- What is the applicant’s general credit history and, especially, the history of this particular bank;
- under what project is an application for a loan.
In most banks, credit to entrepreneurs as a maximum term for which a loan is granted is three years. It is important to know that there are several government programs in the country that provide concessional lending to small businesses for certain projects, but in this case only banks that are included in this program can carry out lending.
Banks and funds provide several types and methods of lending to individual entrepreneurs.
Microcredit provides for the use of a simplified scheme, according to which loans are provided for individuals. This scheme is a procedure for providing a limited amount on the basis of a loan agreement between the lending organization and the entrepreneur. In addition, other mechanisms may be used as part of the microcredit procedure, among which the most popular are overdraft loans and bank guarantees. Leasing and factoring, allocation of funds for the purchase of vehicles, equipment and even replenishment of the volume of working resources are widely used in small businesses. In some cases, loans for IP are provided for the acquisition of real estate.
Deposits, as a type of lending, are a rather profitable option for entrepreneurs, because unlike deposits for legal entities, there is the possibility of withdrawing the entire deposit amount ahead of schedule. In addition, deposit loans for IPs are easily manageable, including through electronic systems available via the Internet.
Foreign currency loans are also available, their demand is associated with the need to purchase goods abroad. To obtain such a loan, the entrepreneur must open a foreign currency account and conclude an appropriate agreement with the bank. The advantage of this loan for entrepreneurs is that it is not necessary to provide the bank with project data and the rationale for acquiring foreign currency. At the same time, the terms and amount of the purchased currency are not limited.
Thus, today banks and funds have the opportunity to provide individual entrepreneurs with a fairly wide range of loan products that are able to ensure the sustainable and effective development of small businesses.