Loan for small business development. Getting problems

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

The weak development of entrepreneurial activity is a consequence not only of the administration and regulatory policy in this area, but also of problematic access to borrowed funds. The fact is that even before the crisis, a loan for small development

business was not among the priority banking products.

Key lending issues

The main problem of this attitude is the non-transparent structure of the enterprise. The primitive level of financial literacy of an entrepreneur is a useless and often risky factor for banks. Even a stable financial company with transparent activities is not always able to take out a loan for small business development. What can we say about the entrepreneur's lack of ability to draw up an elementary financial and accounting report for the bank. The next problem is a small percentage of equity capital in the authorized capital of the enterprise. It is very difficult to get a loan for the development of a small business if the company's balance sheet contains only 5-15% of its own finances, and the rest are borrowed funds. Any mistake in business management canturn into bankruptcy. For stable

development of the company requires at least 30% of the invested own funds. In addition, in order for the bank to provide a loan for the development of small businesses, you will need to have a business plan that indicates all stages of the development of the enterprise. But even in this case, the financial literacy of entrepreneurs leaves much to be desired.

How to get

Before issuing a loan for the development of small businesses, Sberbank, VTB or another credit institution will require mandatory guarantees for its return. Debt repayment is made at the expense of the received profit of the enterprise, without withdrawing money from circulation. This means that the income received must be significantly higher than the interest rate, therefore, in order to receive a loan, you need

realistically assess the possibilities of your business. In addition to high income indicators, the applicant must present collateral for the loan. As such collateral, banks accept collateral, which must be liquid and comparable to the requested amount. A prerequisite for issuing a loan is the availability of an insurance policy not only for collateral and profitable assets, but also for the life of the owner of the enterprise. A small business development loan will require the presence of guarantors from among business partners, legal entities or individuals, as well as key business figures. Such support will show the reliability and good reputation of the applicant. In addition to the full package of documents, the bank canask to draw up an agreement on the right to write off available funds if there are violations of the terms of credit on the part of the borrower. The next step in issuing a loan will be to check the reliability of the borrower. And only after that the security service makes a decision: either “yes” or “no”. There can be no third option. What bank employees are guided by when announcing such a result is confidential information. Moreover, the reasons for the refusal are never communicated to the client. This is the generally accepted policy of all banks.