Business Loan
Table of Contents
1. Definition of "corporate loan"
A corporate loan (also called a business loan or business credit) is a loan to companies or self-employed persons. Such a loan for companies differs in some respects from a loan to private individuals, which is why there are special offers for business customers.
Corporate loans can be differentiated according to various criteria, such as the type of loan (building loan, investment loan, mortgage loan, etc.) or the loan term (short-, medium- or long-term corporate loan).
2. Purpose and importance of corporate loans
Corporate loans represent a possibility of corporate financing. By taking out a corporate loan, the following are financed in particular
Acquisition of working capital
Investments
Participations/ takeovers
Securing liquidity
made possible. Without lending to companies, such business projects are often not feasible. The economic significance of this form of credit is correspondingly great.
Above all, start-ups as well as small and medium-sized enterprises often resort to external sources, such as corporate loans, for business financing.
3. Cost of a corporate loan
Analogous to consumer loans, the interest rates for corporate loans also
the interest rates on the one hand
and the ancillary credit costs on the other
determine the total cost of a loan. For a company loan comparison, the effective annual interest rate should be used, which includes all credit costs incurred. The term of the loan should also be taken into account. The longer the period over which the loan repayment is spread, the higher the total cost.
4. Corporate credit via crowdlending
The most important lenders for companies are still traditional institutions such as banks. However, the requirements for granting bank loans are increasing. This poses problems for small and medium-sized enterprises (SMEs) in particular. Corporate loans via crowdlending are an attractive alternative here.
Platforms that specialise in credit mediation, such as LEND, have lean and efficient processes for credit assessment and allocation. On the one hand, this makes it possible to offer significantly more favourable loan conditions. On the other hand, it is thus possible to grant credit in the area of smaller amounts starting from 20,000 Swiss francs, which is uneconomical for banks.
The necessary transparency of the company when presenting itself on the respective crowdlending platform also offers a positive PR effect.
Learn more about the advantages of SME financing via crowdlending in our blog.