Many people who decide to start a private business very often face many problems. One of the main reasons why the opening is delayed (or the idea is not realized at all) is the lack of finance. At this moment, entrepreneurs decide to use credit funds.
Possible Ways to Get Cash
External financial assistance is very relevant for a novice businessman. The following sources of financing can be distinguished:
- raising funds from private investors;
- a loan in a micro finance organization;
- budget investments;
- getting a loan from a bank.
The lion’s share of the funds of private investors is invested in high-tech production. In other words, private investors willingly invest their money in profitable and highly paid products. If the scope of the enterprise is not associated with high technology, then obtaining funds from private investors is very problematic.
A small business loan can be useful for a novice entrepreneur. Unlike banks, microfinance organizations require a minimum package of documents for registration. But it is important to note that with the ease of execution, these organizations have a very high-interest rate for using credit funds.
An alternative source of funds for a novice businessman can be government investment in the form of grants and subsidies. The main advantage of budget investments is a one-time issuance, while there are no obligations to return financial resources. It should also be borne in mind that investments from the budget are issued for such production, the relevance of which is limited within a certain region.
When it comes to banking institutions, lending to them is always a big risk. Indeed, in a start-up business, there is a very high probability of being unsuccessful and becoming bankrupt.
Factors Affecting a Positive Decision
Consider the main factors that prove the credibility and solvency of the borrower, and as a result, a positive decision of the bank to issue loans to small businesses from scratch. These factors include the following:
- the borrower must be mature;
- mandatory permanent registration at a specific address;
- borrower’s marital status. For a bank, the best option is a registered marriage of the borrower;
- the number of persons held by the borrower;
- the amount that the borrower spends every month on food, utility bills, etc. must be indicated.
A banking institution puts forward several conditions to the borrower that must be met.
These conditions include the following:
- a guarantee from a legal or natural person who does not have a bad credit history and debt;
- the borrower has no loans in other organizations, the payment period of which falls at the time of registration;
- the borrower has movable and immovable property;
- providing a bank institution with a 2-NDFL certificate of personal income;
- providing the bank with a carefully designed business plan.
The procedure for obtaining a loan in various banking institutions is almost the same. For this, you need to provide all the necessary documents and discuss all the details with a manager.