Lending to legal entities: types and conditions

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The development of the economy is directly dependent on the development of business. And for its continuous development, many enterprises do not have enough own funds. It is for this purpose that banking organizations offer to use the services of lending to legal entities. And with the help of borrowed funds, it will be possible to arrange the purchase of equipment, the purchase of real estate, and so on.

Obtaining Features

It is clear that the conditions for lending to legal entities are endowed with their own characteristics. And the procedure for providing this service is strictly regulated. Therefore, if an enterprise needs money, then in order to receive it, a number of requirements will need to be met.

Each financial institution has its own lending rules, which may differ significantly from the features of providing a similar service in another bank. Therefore, the initial step to be taken is to choose a bank for lending to legal entities with suitable conditions. Having chosen favorable conditions for your enterprise, you can start collectingrequired package of documents.

Important conditions

First of all, a banking organization checks the future borrower for a credit history, which, for obvious reasons, must be positive. It is clear that no bank will take the risk of issuing a large loan to a person who, under the terms of a previous agreement, had serious delays in payments, or was not repaid at all. For this purpose, an assessment of the financial condition of the enterprise is carried out on the basis of the presented accounting and financial statements, a bank statement showing all types of transactions that took place on the account for a certain period.

There are often cases when, in order to offer the most suitable option for lending to legal entities, a banking organization demands that the borrower transfer to its service. Therefore, most often, applying to your bank for credit funds becomes the best offer.

Bank lending to legal entities requires compliance with the following standard conditions:

• The offer of many banks for those who have an open current account is the opportunity to use a short-term overdraft loan. Such an offer involves regular replenishment of the account with borrowed funds directed by the borrower for various purposes. Payment on this loan will be debited from the company's account upon receipt of funds automatically.
• Finishing a credit line is considered to be the optimal lending product. For each company, selectindividual conditions, so they should be discussed separately with a specialist in the credit department.

Banking organizations express their loy alty to regular customers, as they are well aware of their financial reputation and specifics of their activities. Banks offer some enterprises to take advantage of targeted programs, under which borrowed funds can be spent on the purchase of equipment, the purchase of expensive elements, which most often act as collateral.

Also, the program of refinancing loans opened in other banks has been successfully developed recently. Approval will be guaranteed if funds are deposited on time for a long time. In other words, having a set of all the necessary conditions that are suitable for the established banking rules, you can go through the procedure for lending to individuals and legal entities.

Pros and cons

The indisputable advantage of lending to legal entities is:

• The ability of a legal entity to receive a really large amount of money and direct it to business development.
• Being a client of the bank where you apply for a loan, you can reduce the time for paperwork.
• You can use investment loans to modernize your own production or expand it.
• No less advantage is the offer by banks of flexible lending terms and with an individual repayment scheme.
• As a pledge can be not onlyproperty of the enterprise, but also the property of the owner of the enterprise, there is also the possibility of using goods in circulation and even receivables.

The disadvantages of obtaining loans by legal entities include:

• Collecting a large package of documents.
• In the absence of collateral or guarantee, the interest rate will be significantly increased.
• Long time processing.
• Collateral has a high value.
• The larger the loan amount or the repayment period, the more expensive the financial resources will cost.

Where to Apply

The opportunity to go through the procedure of lending to legal entities is available in many financial institutions. And each such organization has its own unique lending rules and requirements for the borrower. Therefore, from the very first steps, it is advisable to apply to several banks at once. To date, the following financial and credit organizations are well-deservedly popular in issuing loans to enterprises:

• "Alfa-bank" - offers several programs for lending to enterprises.
• "Bank of Moscow" - it is possible to issue a credit line, overdraft, as well as targeted lending. Commercial mortgage programs and refinancing programs are available.
• Sberbank - its offers include express loans, overdrafts, targeted lending. The funds received can be used to purchase vehicles for the enterprise or real estate. BySome loan programs may require collateral and some do not.
• Vostochny Express Bank - its proposals are to arrange an overdraft. With the help of the received funds, current assets can be replenished. The business loan program does not require collateral.

Types of loans

Banks offer various types of lending to legal entities. Each type has its own design, redemption and use features. When choosing one or another type of loan product, it is worth understanding for what purposes borrowed funds are required. Which product options can banks offer:

• Credit line - with the help of such lending, regular replenishment of working capital is carried out. These funds can be used in settlements with suppliers to pay for goods (services) or to finance current expenses. This type of lending can be revolving or non-revolving. The interest rate can be fixed or floating. The execution of such a line does not require the provision of collateral, but nevertheless, having provided any value, the borrower receives from the bank the opportunity to obtain a loan on more favorable and optimal terms.
• Budget loans - the execution of such loans involves support from the state. Offered to those companies that have signed government contracts (guarantees).
• Urgent loans - for the prompt receipt of the required amount of funds.
• Express loans - refer toexpensive loans, as the interest on them is really high. Their advantage is the high speed of issuing funds to pay for any goods, components or raw materials.
• Overdrafts - this type of lending is preferred by most large companies. The convenience of such lending is the regular replenishment of the account with borrowed funds in the required amount. Payment for such a loan is carried out at the expense of the enterprise by debiting funds from the account automatically.

Interest rate

Overpayment on a loan is directly dependent on the interest rate. And today, the average interest rate offered to a legal entity is approximately 18%, and the fact of providing collateral is not important. This interest rate may be reduced in the following cases:

• The borrower is a regular customer.
• Providing collateral.
• Long established business relationship.

Requirements for borrowers

When applying for a loan, each bank puts forward its own conditions for lending to legal entities, but as for the main points, they are the same:

• Only a business owner or entrepreneur can apply. It is possible to attract guarantors.
• Applicant must be at least 18 years of age.
• Analysis of the financial activity of the enterprise must show break-even operation for at least one year.
• Territorial proximity between the enterprise and the bank should notexceed 150 km.
• A prerequisite is a positive credit history. This item is carefully checked by the bank's security service.
• Even if an enterprise does not meet all the requirements of the bank, it can still be approved for funds. But at the same time, under the terms of the agreement, the interest rate will be overstated, and the loan term will be short.

Documents for registration

As mentioned above, lending to legal entities in Russia will require a lot of strength and patience from the borrower. Preparing a package of documents required for submission to the bank takes a lot of time. At this stage, you need:

• Fill out an application for funds in the form of a banking organization.
• Prepare copies of the passports of the chief accountant and owner of the enterprise.
• Certificate of registration with the Federal Tax Service.
• Statutory package of documents.
• Extract from the Unified State Register of Legal Entities.
• When providing property as a pledge - submit documents for it as well.
• A package of financial documents to confirm the efficiency of the enterprise and its stable condition.
• Contracts with various counterparties.

Maximum and minimum loan amount

Each bank presents its own limits on the amounts provided. The minimum amount for issuing a loan is most often 300,000 rubles, and the maximum amount receivable can even be 150 million rubles. Making a loan for a large amountimplies the transfer of valuable collateral to the bank with the condition of attracting guarantors.

Repayment terms

The calculated order of payments can be differentiated or annuity. In any case, the form of this or that calculation is discussed with the borrower himself during the execution of the loan agreement. As a rule, when lending to legal entities, banks prepare an individual payment schedule.

In the terms of the contract and in the schedule itself, the date of repayment of the next loan payment is prescribed. There is the possibility of early repayment, while the banking organization is not en titled to additional collection of any commissions or pen alties. The procedure for granting credit funds to enterprises is regulated by the Tax Code of the Russian Federation, as well as by laws: Federal Law No. 86, Federal Law No. 218.

Conclusion

This article showed that any enterprise can use the services of banking organizations. Lending to legal entities has its own characteristics. First you need to determine the purpose of receipt and make the right choice not only of a credit institution, but also of a banking product, the conditions of which will be especially convenient and comfortable. The funds received can be used for different purposes or have a designated use. Therefore, it is important to take this moment into account when applying and choose a universal loan or, nevertheless, a target one.