What is the timeframe for funding
Borrowed capital represents part of the funds with which the company's assets were financed. Borrowed capital is given if the provision of capital can be terminated in accordance with general contractual rules and is limited in time, justifies a claim for remuneration by the investor and the investor does not hold a stake in the company and is accordingly not liable.
The most common form of corporate debt is bank credit. Below is information about bank loans.
Most banks in Austria are now universal banks and offer almost all banking transactions. Which bank is the right one for you depends not only on factual but also on emotional aspects - it just has to fit "all around": the bank's business policy, personal relationships, perceived appreciation, conditions.
It is different here than in a happy marriage: Even if you are satisfied with your house bank, you should still give a second bank the feeling that one day you will become your first bank - this tactic is known as "Multi-bank strategy"!
Depending on the purpose and duration, there are different types of credit:
The investment loan is used to finance
- Fixed assets (such as land, buildings, machines, vehicles, etc.) and
- the reconstruction of buildings.
The term of an investment loan depends on the useful life of the investment good. ! One speaks here of the “golden rule of financing”: Everything that you use in the long term, you should also finance in the long term!
The loan amount is paid out all at once when the capital goods are purchased and later paid off in agreed installments. The credit costs incurred can therefore be taken into account relatively precisely in budget planning.
Working capital loan
The working capital loan is a short-term loan (often also a current account loan) to bridge the gap financially between the purchase expenditure and the corresponding sales proceeds.
It is used to finance
- Goods, raw materials, supplies, etc. and
- the pre-financing of other ongoing expenses, such as rent, operating costs, etc.
You can freely dispose of this credit up to the amount agreed with the bank (current account credit line). You are always ready to pay. The working capital loan is unbureaucratic and flexible. The interest is only calculated for the loan amount actually used.
The working capital loan should only be used as short-term financing - for current payments and not for investments. There are additional expenses and fees for this flexible form of credit. Let your bank explain all the conditions to you in detail.
In the case of a liability loan (bank guarantee), the bank undertakes to pay a certain amount if you do not meet this obligation yourself. Bank guarantees serve as security for payment obligations, e.g. in plant construction or instead of a rental deposit.
Please note that the bank will require collateral for the above types of financing.
When you talk about borrowing costs, you probably think of interest rates. In fact, there are a number of other costs associated with taking out a loan, for example:
- Handling fee
one-time 0.5 to 2 percent of the loan amount
- Commitment fee
often 0.5 percent a year for the unused framework provided by the bank.
- Overdraft commission and interest
if you exceed the credit limit granted
- Account closing fee
- Cash expenses
- Inquiries from the credit protection association
- Land register extracts
- Valuation fees / valuation reports
when valuing collateral
- Foreign currency loan surcharges
when the exchange rate changes
The mentioned ancillary costs are a matter of negotiation. The interest rate itself is also a matter of negotiation and not a fixed one. He is a. depends on the following factors:
- general interest rate level
- Borrower's creditworthiness
- running time
- Risk assessment of the project to be financed
- Time of the installment payments
- Type and time of interest settlement
The interest rate can be fixed or variable. Usually you will agree to a floating rate, i. that is, if the general level of interest changes, the interest rate also changes. In any case, you should agree to link the interest rate to a reference interest rate (e.g. EURIBOR or LIBOR) so that you do not have to constantly negotiate the interest rate with the bank.
When comparing different loan offers, the effective interest rate (the interest rate that includes all additional costs) plays a decisive role. Let us therefore give you the effective interest rate. This enables a direct comparison between different loan offers.
Capitalization, installment and interest payment
For the actual interest charge, in addition to the specified annual interest rate,
- the capitalization and
- the timing of the interest and installment payments is important.
Capitalization is how often a loan is settled in the year and thus compound interest is added.
Billing takes place quarterly.
Payment in installments is made every six months.
Compound interest accrues, as the interest is added quarterly and interest is paid again until the half-yearly rate has been paid.
Also the Time of interest payment affects the credit burdens:
- Anticipated interest rate:
You have to pay the interest in advance for the next interest period, e.g. B. for the next quarter. An anticipatory interest rate rarely occurs in practice and would mean a disadvantage for you.
- Decursive interest rate:
Here you pay the interest in retrospect, e.g. B. for the last quarter. This variant is common in practice. As a rule, you pay your interest in arrears at the end of each quarter, i.e. at the end of March, June, September and December.
There are two ways of doing this Loan repayment:
- Payment by means of flat rates (= Annuities)
You repay constant fixed amounts, which include both the repayment (of the amount borrowed) and the interest payment.
- Payment by means of capital installments
Here a distinction is made between the repayment of the loan taken out and the interest payments.
The total debt is settled faster and you therefore pay less interest.
Compared to paying with flat rates, you do not have an exact calculation basis
The charges at the beginning of the repayment period are higher.
If you want a loan, you have to provide collateral to the bank. Especially when it comes to a long-term loan, collateral is at play for the loan approval and the Calculation of interest plays a crucial role.
When founding or taking over a company, you have to be prepared for the fact that you will have to be liable for the loan with all of your private assets. The bank will only want to waive your personal liability in rare cases. Perhaps, however, you can agree on a limitation of your personal liability (e.g. to a percentage of the outstanding claim that is fixed in advance).
The collateral you must provide to the bank can be liquidated quickly be, d. H. can be turned into cash quickly.
Typical securities are
- the entry of land and condominiums in the land register
- Life insurance pledging
- Deposit of savings books or securities
- Pledging of accounts receivable
- Pledging of home loan and savings contracts
- Pledging of rental agreements
If you offer your collateral to the bank, you must expect that the bank will provide it in relative terms rated low become. When evaluating the collateral, the bank takes into account the costs that it would incur if the collateral were realized.
Also Guarantees can serve as security. Before you decide to take this step, everyone should know about the consequences be aware of a guarantee.
There are essentially two types of guarantees:
- Solidarity guarantee
In this case, the bank can demand a payment from the surety right away without approaching the actual debtor. The debtor and the surety are therefore jointly and severally liable, d. H. equivalent to.
- Deficiency Guarantee
Here the bank can only access the surety's assets if you - as the borrower - have not met your payment obligation. If you have a loan guarantee from a public liability entity, such as B. Austria Wirtschaftsservice Ges.m.b.H. get, it will always be a deficiency guarantee.
In any case, you should consider what collateral you can offer in advance of the loan negotiations.
What to do if you have too little collateral?
Some funding agencies can assume liability in special cases. You can find information on this at www.wko.at/ktn/foerderuebersicht or as part of a personal funding consultation in your Carinthia Chamber of Commerce.
True to the motto "So check who binds ..." Basel II or Basel III means that banks Adjust interest rates on loans better than before to the respective risk should. In this sense, the future competitiveness and solvency of a company is determined by means of a credit rating. . A good credit rating enables inexpensive financing and is a success and competitive factor for every company and at the same time a guarantee for better financial stability.
The following checklist gives you pointers on how you can improve the creditworthiness and financial position of your company.
Reduce the (interest-bearing) total capital requirement
- Invoice all services provided immediately
- Agree on payment terms as short as possible with your customers and at least advance and partial payments customary in the industry
- Arrange standing orders or direct debit for recurring services
- Shorten billing and dunning periods
- Optimize the capital tied up in the inventories and reduce the inventories to the minimum stock at least before the balance sheet date
- Dispose of assets that are not required for business operations (but ask your tax advisor beforehand about the tax implications)
- Apply for refunds (apprentice bonuses, energy tax payments, etc.) as early as possible and not only in the course of a delayed submission of the annual financial statements
- Make sure that cash deposits in cash registers are paid into working capital accounts as quickly as possible
- Balance the down payments received (as far as possible) with any non-billable services activated in the inventories - this reduces the balance sheet total, which also serves as the basis for calculating the equity ratio.
The Creditworthiness naturally also depends on the future visions, marketing strategies and management qualities of the company.
At the Credit rating The following factors play a role, among others significant role:
- Customer and supplier structure
- Industry risks
- Customer-bank relationship
- Information behavior of the entrepreneur
For you as an entrepreneur, Basel II or Basel III means that you have to present your future prospects of success to the bank in more detail if you want to get an affordable bank loan.
Here are a few tips on the way to a successful loan negotiation:
- Apply for credit early enough
Talk to your bank early on and personally. The larger the loan amount, the longer the approval process will take.
- Specific concerns
Before the first appointment, think carefully about what exactly you want from the bank. What do you need the loan for and for how long? Remember that the useful life of the capital goods should correlate with the term of the loan.
- Good preparation
Come to the loan interview well prepared. Bring all the necessary documents with you to the interview:
- Business plan
- Financing plan
- Balance sheets
- Cost estimates
- additional information on technical data and management
- Truthful statements
Put the cards on the table! Be sure to stay truthful when it comes to information about your financial position and results of operations.
Think about what collateral you can offer.
- Effective interest rate
Do not forget that - with the exception of the loan fee - the additional costs of the loan are basically a matter of negotiation. Ask for an effective interest rate that includes all additional costs.
- Fixed interest rate
In the case of a variable interest rate, agree on a fixed interest rate based on a reference interest rate (e.g. Euribor, Libor).
- Amortization-free periods
Amortization-free periods are common for investment loans. Negotiate that you only have to pay the first loan installment after a certain period of time (e.g. after six, eight, ten or twelve months).
- Offers from several banks
Always obtain loan offers from several banks. This is how you get a market overview. Clarify how long the interest rate is fixed and on what size it is then made dependent. You can only compare the offers with this information.
- Repayment rates
Coordinate the planned repayment installments with the expected revenues in order to avoid liquidity bottlenecks.
Have loan commitments confirmed in writing.
Do not be afraid to actively address and use grants.
- Communication with the bank
Even after signing the loan agreement, consider your bank as a partner in money matters. Inform your bank of important business events and ongoing business success. Avoid overdrafts that have not been discussed.
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