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The trajectory of an entrepreneur is full of challenges. Among them, the ability to maintain financial health and make investments, is, of course, one of the biggest difficulties of the day to day business and its staff. Hence, it is so important to understand what business loan is and to identify when it will be beneficial to your business.

There are several ways to fund your organization, such as bank loans, angel investors, the anticipation of receivables and more.

The business loan can be useful (and in some cases, vital) either at the beginning of the company when you are building the foundations of the organization. Or, over the years, when investments are needed to:

  • Heal the lack of stock
  • Create outreach and marketing actions
  • Make an investment in working capital, among others.

By understanding what is a business loan, you can resort to a form that meets your needs and that fits in your pocket without compromising your cash flow.

So when to make a business loan? Some situations may indicate that the time is right for this decision, including the need to:

  • Wholesale purchase for reduction of purchase price
  • Processes improvement
  • Expansion of infrastructure and staff
  • Need to reach more customers

See our small company loans deals

What is business loan?

82% of businesses that are closed-end up due to cash flow problems. Thinking about the possibility of holding a business loan by this resource from OakParkFinancial may be the solution to keep your business active and give it the strength it needed to grow.

The business loan is a type of financing that you can use to meet the needs of your growing business.

If you need financing to expand your existing business, buy machines, invest in inventory, increase production, etc., the business loan can meet your needs.

In business loans, as well as in other types of loans, your company requests capital from a financial institution (we will see below that there are several options besides traditional banks).

From some analysis and payment guarantees, the amount is released and must be paid, with interest, fines and other charges, which form the total effective cost of the loan.

Currently, the preferred form of payment is the rebate of the total amount, in installments over a pre-agreed time period.

The truth is that this is a quick and generic explanation about what business loan is. The lending market for small businesses is constantly evolving.

As technology advances and regulation changes, many types of business financing are created. Each one with its peculiarity.

Types of Business Loans: 5 Options for Your Business

Types of Business Loans: 5 Options for Your Business

As we mentioned earlier, in seeking to understand; what is business loan and what are the options that your company has access to, there are a multitude of alternatives. Among them, loans with financial and overdraft (beware of this!).

However, 5 modalities stand out in the capital search scenario:

Investors Angels

Investors Angels

It is very common in startups, but it is not unique to this business model.

In this case, investors are already stabilized entrepreneurs in the market, who “lend” money to developing companies, hoping for a future return.

Financing is like a great entrepreneur’s investment in a rising business.

Anticipation of receivables

Do you know when you give a billing deadline for your customer to pay for your product or service?

In anticipation of receivables, you go up to a factoring or financial, and request the advance of this amount. That is, you will not be creating a debt, you will only be making a receipt , using money that is already yours.

Crowding

Crowding, or collective funding, is a practice that uses the Internet to raise funds.

The company that wants the loan, creates a profile on a platform that offers this type of service, indicates what value is your goal and how long you need the money.

The idea is divulged and anyone can contribute with varied values.

It is interesting that the company offers a “gift” to those who contribute to the idea, such as a free trial when the service is launched.

Bank loans

It is the most common business loan, however, it may present higher rates and interest than the other options.

Online credit lines

The online loan is safe, fast and democratic.

The basic concept of online credit lines is to lend the requested money while you make the payment through monthly installments.

The technology also proposes a lower interest rate than those practiced by traditional financial institutions.

Online fast credit TOP 10 offers (March 2019)

 

The amounts available for non-bank loans are usually not very large but their value varies from company to company. An interesting aspect is that many companies also offer small amounts, an option that does not exist for classic banks. Attention, the maximum amount available depends on a number of factors, such as the monthly earnings of the person requesting it. Also, some companies have a maximum cap for the first credit granted, which increases at the second application.

 

The fast loan concept comes from English, where it is known as payday loan or cash advance . As the name says, in the United States, the term generally refers to an urgent form of credit that is fully reimbursed on the day of receipt of the next salary.

What is a fast loan?

 

In the Americans, the system works in a very simple way. The customer completes and signs a check on the company’s name, which uses it to withdraw from the account the amount borrowed plus the interest on the salary day. Another commonly used practice there is pre-approval of electronic reimbursement directly from your account. In this case, the creditor receives the money immediately after the customer receives the first transfer.

Loan and fast non-bank credit In Romania, the term has broader coverage and virtually denotes any non-bank credits. They are granted by non-banking financial institutions (IFNs) and have multiple advantages over a classic loan. IFNs operate completely legally and are controlled and regulated by the National Bank of Romania, but the conditions they have to comply with are less stringent than those imposed on banks. For this reason, IFNs can provide much faster and more flexible loans than they have with simplified procedures.

For quick credit , guarantees, salary certificates, or too many other papers are generally unnecessary. Obviously, the risk that the non-banking financial institution assumes is much higher. That’s why taxes or interest rates are higher than in the case of a bank loan, without this feeling too much in the client’s pocket due to small amounts and short repayment periods.

The main features of a fast loan are reduced formalities and easy approval. In many cases, you can apply within a few minutes for an online credit and your money gets instantly in your account.

These types of loans are ideal for those who have unexpected trouble and need urgent money for a short period of time. In case of an unexpected problem or a critical situation you do not have time to go to the bank and wait until your request is analyzed. If you do not have a guarantee or a salary certificate, the banks will refuse you anyway. In this situation, the best and most convenient solution is to ask for a quick loan , which will help you get rid of the trouble.

How much can you get from a quick loan?

How much can you get from a quick loan?

Let us briefly review the amounts that can be obtained from several important non-bank financial institutions in Romania:

  • Provident – provides credits between 500 and 5000 lei
  • Ferratum – amounts from 200 to 1400 RON
  • Mozipo – the minimum credit is only 100 Ron, the maximum is 1500 RON
  • Onnen – a good alternative when you need more money. The minimum amount is 1000 RON but the maximum ceiling can reach up to 10000 RON.
  • Viva Credit – useful for small amounts, between 100-1000 RON.
  • Tele Credit – you can get from 100 to 2000 lei.
  • Happy Credit – at least 400 and up to 4000 lei, but also offers larger amounts if needed.
  • Credit Fix – another firm with a minimum threshold of just $ 100 (max 1500 RON).
  • Extra Simple – offers between 200 and 2000 lei.
  • Zaplo – minimum 150 RON, maximum 1500 RON.

What are the advantages of a fast credit ?

What are the advantages of a fast credit ?

  • You get the money very quickly. There are sites where you can get credits online only with the bulletin. Most of the time, the money reaches you within 24 hours, but in some cases only takes a few hours. Ideal in urgent cases.
  • Simple procedures. Generally, the approval process does not take more than a day. Some non-bank financial institutions even notify you if you received your credit.
  • No papers. Do you have a valid bulletin and proof of income? It’s all you need for a quick loan, the wage certificate is not necessary.
  • Small amounts, fast reimbursement. You can get a fast fixed credit for the amount and period you want without having to pay interest for a long time. Additionally, early repayment is also accepted.
  • There are no warranties or guarantees. You can stay quiet, you will not be homeless in the unfortunate case where you can not pay in time.
  • It’s your business what you do with money. The non-bank financial institution does not ask for explanations, you can use the money from a quick loan for whatever purpose you want.
  • It is very convenient. In general, there is no need to move around and you can complete the whole procedure from home.
  • It’s confidential. The institution does not disclose data about you and no one finds you have financial problems or you have requested a credit.
  • Your financial history does not matter. You will get a quick credit even if you have other loans or debts. Some non-banking financial institutions will also give you money if you appear in the Credit Bureau database. This is especially great when you need money to cover urgently the maturity of another credit.
  • Flexible terms. From 100 to 10000 RON, from one day to one year. Your choice belongs to you.
  • Clear conditions. The interest is fixed and you find it from the beginning, without any other hidden costs or commissions. Although interest may seem great, remember that its percentage is calculated over a full year. As your credit is for a much shorter period, you will not pay too much.
  • Do not waste time. Why go to a bank, fill in unnecessary forms and answer all sorts of questions?

Terms and reimbursement date

 

The terms differ from one company to another, but non-bank financial institutions display it very clearly in order not to allow further complaints. Most businesses have a virtual calculator on the site, where you enter the amount and time you want, and you find all the costs, such as annual interest, the total amount to be repaid, or the monthly rate (if you choose this option).

The reimbursement period for non-bank loans is selected by yourself, depending on your personal needs. Let’s see what are the minimum and maximum limits for a few companies:

  • Provident: from 12 weeks
  • Ferratum: Fixed period of 62 days
  • Mozipo: between 2 and 6 months
  • Onnen: minimum 3 months and maximum 24 months
  • Viva Credit: Ideal for short periods of 1-35 days
  • Tele Credit: between 10 and 30 days
  • Happy Credit: longer periods, between 6-48 months
  • Fixed Credit: Online loans with a refund between 5 and 45 days
  • Extra Easy: non-bank credits, with duration of 5-30 days
  • Zaplo: from 5 to 30 days

The conditions you have to meet for a quick credit

The conditions you have to meet for a quick credit

The space of this article does not allow us to get into too much detail, the terms of a fast loan differ from one firm to another. The longer the amount and time you want, the more complicated the conditions. However, there are some general conditions imposed by all non-banking financial institutions.

First of all, you need a valid ID. Generally, this means an ID or an old ID. Few companies are accepting other options. If you only have a temporary identity card or a passport, the chances of getting a loan on their basis are lower.

Age is also a criterion. In order to obtain a non-bank credit, it is mandatory to have the minimum age of 18 fulfilled. Some companies, however, require a lower minimum age, which may reach 21 or even 24 years. Some companies also require a maximum age of 75 years. In some cases, it may be higher or it is even possible that there is no maximum age limit.

Another mandatory condition is to be able to prove that you have a stable monthly income. In the case of a classic bank, that means getting a salary certificate. Non-bank financial institutions are much more flexible, they just want to make sure you get some money to get your credit back, it’s not mandatory to have a permanent job. Stable income can usually be demonstrated through an account statement that shows monthly cash inflows. The money source is not important, it can be pension, salary, rent, interest and dividends, money from children or just about anything else.

Depending on the amount requested, there is also a minimum monthly income to be proven. As a rule, the minimum ceiling revolves around 300 lei but varies from company to company.

How to apply for a quick loan?

How to apply for a quick loan?

The first thing you have to do is study the market well. Both the amounts available through online credits and their conditions are very diverse. There is no firm to be the best in this area, some are specialized in non-bank loans for short or long periods, others have more flexible lending conditions in exchange for higher interest rates. The market offer is very generous, choosing the solution that best suits your needs.

At present there is strong competition between fast-paced companies in Romania. You can take advantage of this to get very favorable conditions. Some non-bank financial institutions even give interest-free loans for the first contract with a new client in an attempt to reassure clients. Look for these promotional offers and use them if they fit your requirements.

Read carefully the terms and conditions of the loan. You can find them on the companies’ website and are usually very clear, but you have to make sure you have gone through them carefully. Many companies offer an online credit card, use it. If you do not have access to an office computer, most sites are also available today in tablet or mobile phone versions. Also consult the opinions of other clients who have already contacted the institution.

If you are the kind of person who wants to know all the details, read the applicable laws and the rights you have according to the regulations in force. You find links to these, or even their names, on the pages of non-banking financial institutions.

Weigh well the costs involved and the revenue you have. Calculate exactly the amount you need and your ability to return on time, you can also choose to pay in installments if needed. If you delay your payment, you will have to pay a higher amount.

Once you have chosen, make sure that you meet the necessary conditions and that you have the required documents at your fingertips. Fast loan can be obtained very simply, choose one of the methods that the company offers. The most convenient option is online but you can complete the procedure by phone or faxing. Of course, you also have the option to move to the headquarters of the non-bank financial institution or to arrange a meeting with one of their sales agents.

How can you use a quick loan?

How can you use a quick loan?

In short, you can use it for any purpose you want. Unlike a normal credit, for a quick credit it is not necessary to specify the money destination and the IFN will not ask you anything about it.

As a rule, people resort to this type of loan to resolve an urgent problem such as medical expenses, accidents, unforeseen repairs, fines or the like. But you can use your money and take advantage of an opportunity like a good investment or buying a product at a promotional price. Nobody prevents you from spending it for other purposes, such as a holiday, a gift for a dear person or even refinancing another matured credit.

 

What Is the Best Way to Finance- Low Interest?

 

 

Do you live the dream of buying a car every day, but do not have all the money yet? This is a very common situation when you are young, because, after all, most young people do not have assets; conclude the college and then get a job in the case of diligent young people.

However, you need a car to get around to work and also to parties and other places to have fun. Faced with this change in society and the eminent need to have a means of locomotion, the need for financing arises. Well, the guarantee of a job coupled with the emotions of independence, which the automobile gives us, pushes them towards financing without planning.

It is worth noting that there is no better financing option without adequate planning. So hold on to your emotions and follow with me to understand why most people can not complete the funding due to unforeseen circumstances.

Conscious financing

Conscious financing

The most common attitude of the people is to seek financing of a car or whatever it is, whenever they feel the desire for it. The point is that most of them are not prepared to do any type of financing, but, look for the option offered by the bank the solution for everything.

I do not want you to have misfortunes in your life, so I ask you to analyze the probability that you lose your current job and see if it is possible to maintain your standard of living and also to finance your car with the other sources of income.

Assuming you do not have an extra income, just the monthly salary, I advise you to make an emergency reservation and only then think about financing.

Therefore, having your security and other ways to keep your monthly expenses, then know the best way to finance your future car.

3 financing options that are right for you

3 financing options that are right for you

Bank of the automaker:

This type of financing is ideal for those who want to pay much lower interest rates. However, the requirements demanded by automakers are rigid. Automakers rarely provide financing to customers who at some point in their life, not necessarily at the present time, have stopped keeping their accounts in order. Then there are few people who have kept their finances up to date, from the youth, if you are one of them it is worth opting for this option.

Leasing:

In this type of model the bank buys the car and offers it in the form of rent, the property is in the name of the bank until all the parcels are removed. The good thing is that it does not need input; interest is lower; in addition, once you have paid all installments, at the end of the contract, you can purchase the vehicle.

Balloon Financing :

This type of financing is very common among the most successful brands on the market. Already this name refers to the last installment that varies between 15% to 50% of the total value of the vehicle. This type of mode is very popular because it offers lower interest than the common financing, however, you need a used car where you are willing to make the exchange for the new 0km.

Conclusion

The most important thing is to make a conscious financing because there are several options for you to do the financing of your car. Choose the one that best suits your needs.

The best option to finance a car is safety, the rest can be bypassed. Make conscious financing and you will not suffer the pain of future complications, moreover, it will save you good money by not opting for common funding.

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9 Benefits of Using Optical Fiber for Business

 

The development of fiber optics in business is a priority for telecom players in Canada. Here is an overview of how this technology works and its competitive advantages.

Unmatched navigation comfort

Unmatched navigation comfort

 

Optical fiber guarantees you the most stable internet access in the world. Fast, it ensures you a maximum and symmetrical throughput in all circumstances with an almost unlimited bandwidth. The user can browse the Net freely, make calls, chat in high-definition video conferencing, all simultaneously and without clutter.

Low packet loss per packet

Low packet loss per packet

The optical fiber can carry information over long distances almost without undergoing attenuation of the driven signal. The technology has the advantage of being naturally insensitive to external electrical disturbances, which guarantees a better quality of service, and allows flows always symmetrical.

An affordable price

An affordable price

A fiber optic subscription is not necessarily more expensive than an ADSL offer and provides a much better quality.

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Low maintenance cost

Low maintenance cost

The maintenance cost of optical fiber is low compared to other types of wiring. This is a sustainable competitive advantage for the company.

Simultaneous use

Simultaneous use

With fiber, employees of the company have the opportunity to connect to many services simultaneously (such as internet service, IP telephony and internet service), maintaining the same speed and a good quality of service.

Increased profitability

Increased profitability

The profitability of optical fiber is another advantage: the life cycle of the network is 20 years, while the average break-even point varies from two to five years. This technology has a lasting and economic advantage for companies.

Guaranteed security

 

Optical fiber is an ideal medium for transmitting information over a network. Reliable and secure, this type of system does not allow, by any means, to listen to or intercept the light signals circulating inside the technology.

A service improvement

The speeds achieved by optical fiber will allow the development of new applications and innovative services, which will differentiate the company from its competitors.

New uses

New uses

Optical fiber provides an internet connection adapted to the new needs of companies . The latter can use the technology for the following uses:

  • High-speed heavy file transmission from 100 Mb / s to 622 Mb / s, and up to over 1 Gb / s.
  • The fiber optic connection of sites that centralize IT resources to provide all employees with comfort similar to access to a local computer server.
  • IP telephony.
  • Videoconferencing, telepresence and telecollaboration.
  • Data protection of the company.
  • Cloud computing.
  • Access to storage volumes tailored to your needs.
  • The development of innovative digital services.
  • The deployment of unified communication solutions and business applications.

Subsidized Loans to Agriculture | Professional Loan

 

Since its launch in 1965, the system of subsidized agricultural loans has played a major role in economic aid to agriculture. Its purpose is to support farm investments. In addition, it helps to promote the installation of young farmers by facilitating their access to bank credit. On the other hand, the administrative and financial management of this device is relatively complex. Especially since it mobilizes important human resources from the State.

Most recently, subsidized agricultural loans have been abolished. Indeed, following the decision of the European Commission of 17 November 2016, a new national framework for installation aids has been validated.

The different types of subsidized loans to agriculture 

Subsidized agricultural loans are business loans granted at reduced rates by the State in collaboration with banking institutions. They aim to:

  • facilitate the installation of young farmers
  • modernize a farm
  • allow an Agricultural Equipment Utilization Cooperative (CUMA) to invest in high-performance equipment

Before their removal and replacement, there were 3 types of subsidized agricultural loans.

 

Medium Term Special Young Farmer Loans (MTS-JA)

Medium Term Special Young Farmer Loans (MTS-JA)

The implementation of these regulated loans is mainly aimed at supporting the settlement of young farmers. They are co-financed by the European Agricultural Fund for Rural Development (EAFRD) and credit institutions. This is the case for BNP Paribas, Crédit Agricole, Crédit Maritime Mutuel, Banque Populaire Group, Crédit Industriel et Commercial and Crédit Mutuel.

 

Recipients of the MTS-JA Loan

Are eligible for this loan:

  • young farmers between 18 to 40 years old
  • Farms with limited liability (EARL)
  • agricultural groups operating in common (GAEC)

 

aims

This loan is granted for farmers who wish to:

  • take back the capital an exploitation
  • acquire new land, shares or equipment
  • meet their working capital requirements (WCR ) during the first year
  • develop the exploitation

 

Duration and amount of the loan

Over a period of up to 15 years for an amount capped at:

  • € 22,000 for disadvantaged or mountain areas
  • 11 800 euros for the plain areas

 

Medium Term Specialized Loans (MTS-Others)

Medium Term Specialized Loans (MTS-Others)

This type of loan is no longer available since February 29, 2016. However, those who have benefited from it will still be able to benefit from the previously proposed bonus.

 

Who are the beneficiaries ?

  • agricultural groups operating in common
  • pastoral land associations
  • pastoral groupings

 

Why ?

  • to take over in whole or in part a holding
  • to renew the investment (GAEC)

 

Duration and amount of the loan

110,000 euros maximum on:

  • 15 years for disadvantaged or mountainous areas
  • 12 years for the plain areas

 

Medium Term Specialized Loans for Farm Equipment Use Cooperatives (MTS-CUMA)

Medium Term Specialized Loans for Farm Equipment Use Cooperatives (MTS-CUMA)

Since April 30, 2015, this subsidized loan to CUMAs has been replaced by the national support scheme (DiNA) . This new arrangement makes it possible to finance the projects and initiatives that these cooperatives are trying to put in place. Of course, it benefits only CUMA approved.

 

Accompaniment axes

This support system for CUMA includes two types of help:

  • support for intangible investments: hiring, implementation of group approaches to adopt new practices (GIEE) …
  • aid for material investments: construction of sheds and ancillary buildings

 

Envelope allocated to the CUMA DiNA

DiNA CUMA can count each year on a loan of 2.5 million euros. Moreover, for the 12,260 member cooperatives of the FNCUMA (National Federation of CUMA), each of them can benefit from a maximum of 1,500 euros.

 

The reform of subsidized loans to agriculture MTS-JA

On 17 November 2016, the European Commission endorsed the reform of subsidized agricultural loans. It took this institution only 30 days to decide in favor of this reform.

 

Why a reform of soft loans to agriculture?

Why a reform of soft loans to agriculture?

At the origin of this initiative, Young Farmers who were losing interest in more and more system. And for good reason, the bonus period has increased from 7 to 5 years. Moreover, rates have been revised downward in recent years. Then, to replace this device, they proposed the creation of a fourth national modulation entitled “cost of recovery and modernization effort within the Young Farmers Endowment (ADI)”. This new modulation will separate cash assistance, recovery costs and modernization.

The cost of recovery does include many expenses that far exceed the amount of loans granted. Financing of shares , recovery of land, livestock, buildings …, the old subsidized loan envelope was insufficient to finance the resumption of a farm. This is why Young Farmers wanted this reform, and this, in order to sustain the budget dedicated to the installation and have a more attractive device.

 

A new, simpler and more interesting device

 

Two changes are thus made by the reform of MTS-JA subsidized loans to the ADI.

 

Increase in the basic limits of the ADI

Since 1 January 2017, the basic limits of the ADI have changed from:

  • 9,000 to 12,000 euros for the plain areas
  • € 12,500 to € 16,500 for single disadvantaged areas

 

Replacement of subsidized loans with a new ADI subsidy

Called “modernization-recovery”, this new bonus varies according to the cost of recovery and exploitation. Likewise, it depends on modernization investments. It should be noted that it only concerns projects exceeding 100,000 euros of investment. Also, its amount is set at the minimum of:

  • 7,000 euros in the plain area
  • € 13,500 in disadvantaged area

 

Good to know

Although the regulatory framework applies at the national level, the new ADI grid is discussed in the regions. This new ADI schedule is applicable since June 1st, 2017.

 

 

Personal Loans and Payday Loans Glossary

Young afro-american ?an working with laptop and smartphone outdoor

Accrued Interest This is an accumulated interest you have to pay. It may be fixed or increasing over time. Annual Fees Annual fees are what banks charge on an annual basis for their maintenance. Credit lines. Applied Interest Rate Also known as flat interest rates. And is used by banks to entice customers. When you compare personal loans, look at effective interest rates (EIR) instead, as this rate factors in all fees. Balance Transfer A balance It usually has a grace period for 6 to 12 months. Borrower This financial institution or moneylender. If you take the borrower. Cancellation Fees When you want to cancel your account. This is to credit line loans. Collateral With secured loans, can be approved. In the event that you cannot pay off your debt This is called a collateral. Conversion Conversion is the act of transferring your debt to another bank. Credit Limit Usually applicable to credit lines, the lender can borrow from the bank. Credit Line As one of the most popular personal loans in Thailand You only pay interest on what you’ve borrowed. Credit Rating Your credit is a measure to be a borrower. This app is accessible by banks in your bank account. Credit Report The credit report is a record of the borrower’s entire history. Credit Bureau Thailand issues this to banks whenever they are enquire about a borrower. Default A default is The bank might repossess what you have put up as collateral. Early Redemption Charge With term loans such as personal instalments Effective Interest Rate The effective interest rate (sometimes called EIR) is what you need to know for loans. This is because EIR takes into consideration the compounding interest, processing and handling fees, which comes up to what you actually pay on your loan. Fixed Rate Loan This does not fluctuate throughout the loan tenor. Grace Period Also known as an interest period, this is a 0% interest on your interest. Balance transfer loans are known for their grace periods, which can go up to 12 months. Late Payment Fees The payment date, the lender will charge you a late payment fee. Lender This financial institution, moneylender advancing a loan.

Loan Tenor

Loan Tenor

A loan tenor, or a loan term, is the length of time you agree to pay the loan. It can range from months to years. Minimum Sum This is the minimum. This is more. Monthly Repayments A monthly repayment is the sum you are required to pay the lender each month. This usually includes the interest as well. Personal Instalment A personal instalment is a loan that disburses a fixed amount of time. Revolving Loan Whenever you need money, you can borrow up to When you’ve paid your monthly statement, you can borrow more. This is the opposite of a term loan. Secured Loan A collateral before it can get approved. Because of the secured loans usually offer lower interest rates compared to unsecured loans. Term Loan With a term loan, you have to make a monthly payment This is the opposite of a revolving loan. Total Amount Payable When you add the interest rates, processing and handling fees on the amount tenor, the total amount payable. Unsecured Loan This loan does not require collateral. Some unsecured loans are credit lines and credit cards.

The Right Legal Form for Your Company and What Your Financiers Want To Read About It in the Business Plan

When you make yourself independent, you have to make many decisions. One of them refers to the legal form your company should have. Whether GbR, OHG, GmbH or KG – in principle you have the free choice. Your task is to choose the legal form that best suits your start-up and your individual situation.

In your business plan, you can devote your own chapter to the question of legal form, or you can trade it with other applicable laws that govern your creation.

The choice of legal form does not have the same meaning for every foundation. If you’re self-employed as a freelancer with a sole proprietorship, you certainly do not need to say as many words about it as the founders of a start-up would like to go under the corporations. In any case, you should justify your decision in your business plan. “We start our business as a trading company” is better than nothing, but a bit poor.

That’s how you convince the readers of your business plan

A good example from which other founders can learn is the business plan of Dirk Lankenau, who set up his own business with an engineering office. As a registered user, you can find his business plan alongside over thirty other business plans at Catherine Morland.de and be inspired by them.

Dirk has opted for a one-man limited company and justifies it as follows: “In international business, the GmbH enjoys a high reputation under German law in general. The founding of a GmbH creates a high level of legal security for customers, partners and the founder himself. The limitation of liability also protects the entrepreneur against the loss of his private assets in the event that claims are made to the company that are not covered by the working capital. “

He then explains how exactly his company will be built and the structure of his business, and will indicate when to register in the commercial register. He shows his readers that he has dealt intensively with the various aspects of a GmbH and resolutely and planned proceeds.

Why is the legal form so significant?

The legal form of your company decides on such important issues as the form of organization, the bookkeeping, the liability risk and the tax. Therefore, you should weigh carefully before making a decision. Advice on this topic by a lawyer or a tax consultant can pay off.

A typical mistake of founders is not to worry about the legal form and instead just start. Then, however, the tax office assigns the company a legal form and apply to the founders legal provisions that they may not know.

Desk with hands and contract term

In contracts better two times to look and just ask questions – the signature is!

No decision for life: You can change the legal form

Clear advantage is, who deliberately makes the choice of the legal form and is aware of the consequences. But do not worry too much: Usually you can change your decision later. In certain cases it may even make sense to change the legal form in the course of company development. If your business starts small but is focused on rapid growth, it may be smart to move from a single-company status to a limited liability company to limit personal liability.

This is how our founder Wiebke Abel did it when she started with her temporary employment agency for medical staff. You can also see their business plan when you register at Catherine Morland.de. Wiebke writes in the section “legal form and regulations” that they will start their business as a sole proprietorship for lack of capital, but strive for a “fastest possible conversion into a GmbH”. Amongst other things, she argues that her company is designed for growth from the outset and that she wants to limit liability to company assets.

Another good example of what you can write about legal form is the business plan for a web development company, whose founders decided in favor of the rather unusual form of UG & Co. KG. In a brief overview, they outline the advantages and disadvantages of this legal form, showing their readers that they really know what they are getting into.

A special plus of their business plan, which they also kindly provided us with: They do without standard formulations and terminology, but describe the characteristics of the entrepreneurial society in their own words. For example, it is outlined as “confusing” instead of referring to the accounting obligation – because that’s exactly how it presents itself to many founders due to the accounting obligation.

The legal form decides how a company is structured

And the two founders of a software company have done an exemplary solution in their business plan: they not only devote their own chapter to the topic of legal form, but have also prefaced this with a separate section on the internal organization of their company – both are closely related. In it, they describe in detail how they share the tasks in the company as a shareholder, what methods they apply, when they hire staff and what kind of leadership style they set. A better look into the future company can not give its potential donors actually. Not surprisingly, their business plan – as well as the other two examples given here and any other plans you can find on Catherine Morland.de – has led to successful financing .

Which legal form is the right one?

To put it simply, the legal form of your formation is the sole proprietorship, a partnership or a corporation.

Each legal form has advantages and disadvantages. Before you decide on one of them, you should ask yourself these questions:

  • Am I alone or with others?
  • What will be the economic risk?
  • How much equity can I raise?

Man on swing is in balance

This entrepreneur is finished with her business plan chapter on legal form and therefore extremely happy.

These are the common legal forms for founders in detail

one-man business

The establishment of a sole proprietorship takes place unbureaucratically and quickly and is associated with low costs. You do not need any capital, but you are liable for all of your personal assets if things go wrong. Unless you explicitly opt for a different legal form, your startup will automatically run as a sole proprietorship.

If you want to start alone and small, without capital and with manageable risk, nothing speaks against starting as a sole proprietorship. Depending on the start-up plans, an asset or professional indemnity insurance may already be sufficient here to secure your private assets.

With your financiers, you can earn important benefits if you base your business plan on your choice with the low risk of your project and the low start-up costs of a sole proprietorship.

Civil law

As soon as you get together with one or more other partners, a community of civil law (GbR) arises. GbR is the simplest form of partnership. Special legal forms such as the Open Trade Company (OHG) or the limited partnership (KG) are based on it.

It is advisable to set up a shareholders’ agreement when founding a GbR, which regulates exactly how you divide the profits and losses among each other and who takes which tasks. This will save you from bitter disappointment in the case of a dispute.

The most important points from the contract you should necessarily explain in your business plan, because they are very interesting for your financiers! Before they promise you a financing, they want to know how you want to organize your business and who takes on the responsibility to what extent.

Attention: Even without a contract you are a GbR, as long as you do not specify otherwise. Each one of you is then with his private assets for the debts of the community and may have to pay for the mistakes of others ( here you will find out what pitfalls to observe in the GbR contract )!

Company with limited liability

The GmbH is one of the corporations and is very popular among founders as well as in general business transactions. Their biggest advantage is that liability is limited to the company’s share capital. Your private fortune is secure, usually even in case of bankruptcy.

This advantage, however, has its price. The start-up costs of a GmbH are comparatively high. This is not only due to the deposit, which is at least 12,500 EUR. There are various advisory, notary and court costs added, including for the certification of the articles of association and the entry of the company in the commercial register.

In addition, the accounting and accounting of a GmbH is subject to legal requirements and is associated with a high bureaucracy. Without a competent tax adviser at your side you are probably in the fix.

Anyone who wants to start a GmbH should be able to cite good arguments in his business plan. It is suitable for large and small companies alike, from a one-man business to a growth-oriented start-up. But the effort is especially worthwhile if a larger sum is to be invested anyway, if there are several shareholders and if dynamic growth with high profits and an equally high risk seems probable.

In individual cases, it may make sense to design the entrepreneurial entry as a GbR, only later – if the growth is safe – to change into a limited liability company.

Entrepreneurial company (limited liability)

In order to reduce bureaucratic and financial hurdles for start-up companies, the entrepreneurial company (UG) was introduced in 2008 as a small sister of the GmbH. It is suitable for manageable start-up projects with lower risk. As deposit enough already 1 Euro, because the capital of a “normal” GmbH can gradually be saved. This means that each year some of the profits remain in the company and are not paid until the total is reached. Like every corporation, the entrepreneurial company is accountable.

It can be converted into a GmbH by a shareholder resolution as soon as the accumulated share capital is at least EUR 12,500.

Tips for your business plan

There are many more legal forms with several forms and special forms. Surely you’ve heard of the Gemeinnützige GmbH (gGmbH) or of the GmbH & Co. KG. We do not want to open the big deal here, but show with the most common company forms that there are always arguments for and against a specific legal form.

It’s important that you let readers of your business plan share your thoughts on the subject and not limit yourself to recording the outcome of your consideration. Ideally, you’ll compare the pros and cons of several options to justify your decision.

Since the legal form can have a serious impact on the financing of your foundation, it is advisable to think about it at an early stage and, if necessary, to give advice. At Catherine Morland you can select a legal form under Preferences. Among other things, this affects your calculations on the display of private withdrawals – these are not provided for in corporations. If you are not sure yet, just skip this point and click “I do not know yet”.

As a rule of thumb, the more complex your business structure is and the higher the financial risk, the more detailed your business plan should be.

 

Good luck writing your business plan

Your Dr. Jan Evers

About the author Founding expert dr. Jan Evers is the owner of the consulting firm evers & jung in Hamburg. For ministries, banks and business development organizations, evers & jung GmbH has been developing concepts and solutions for entrepreneurs for more than 15 years that make entrepreneurship easier and more self-reliant.

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The Liquidity Planning In the Business Plan – The 5 Biggest Dangers for Founders

As a founder, you must make sure that you remain liquid. How to do that, I explain to you in this post.

The liquidity planning in your business plan provides an overview of how your balance develops in the first few years after the foundation. She’s putting your deposits in line with your payouts.

The liquidity plan is extremely important for your startup, even more important than profitability. Reason enough to take a closer look at this topic today.

What is liquidity?

 What is liquidity?

Those who are liquid are liquid. So he has enough money to pay all his receivables. It does not matter where this money comes from: Whether it was earned, borrowed or won in a raffle, it does not matter for liquidity planning.

In that it differs from the profitability . The profitability curve in your business plan describes your profits, that is, what’s left over when you deduct your expenses from your earnings. The liquidity curve describes the actual filling level of your wallet or account.

Ideally, both curves are pointing upwards – but in reality this does not have to be the case: a company can be liquid at the same time, but not (yet) profitable, or vice versa profitable, but not liquid.

What is the liquidity planning?

 What is the liquidity planning?

The chapter on liquidity planning in your business plan somehow describes your bank statement of the future. You look ahead to see how much money is in your account in 6, 12 or 24 months at the key date. You could also rename this chapter to “How is our account balance developing?”, Just as the founders of a web application did, whose business plan you, as a user of Catherine Morland, can read and take as a role model.

Screenshot from Catherine Morland, account balance development

Own chapter for liquidity planning in the business plan: How is our account balance developing?

Of course, to predict your balance, you need to know your future cash flows. Payouts include, among other things, purchases of goods and materials, personnel costs, insurance, operating costs, private withdrawals (ie your entrepreneurial salaries), taxes and repayment installments on your loans. Deposits include your sales, but also your equity or loans.

While the payouts can be determined quite well with a little research and planning, it is already difficult for the deposits, especially in terms of your sales . After all, you have no empirical values ‚Äč‚Äčthat you can fall back on. You have no choice but to estimate your future revenues as well as possible by thorough analysis of market, competition and target group. The better you succeed, the better your liquidity planning will be.

If it shows that there is a gap and one day there is low tide in your account, you must try to fill that gap. There are various possibilities for this, such as loans, promotional loans or grants (such as the start-up grant or the start-up allowance).

Why is the liquidity planning so important in starting up?

 Why is the liquidity planning so important in starting up?

Sound liquidity planning is the prerequisite for your business success. Imagine, you suddenly run out of money and you can no longer pay your employees or no new goods to order! Then your company threatens to go out and it will not do you any good that your business is actually starting and your order books are full.

Because we know how difficult many founders are doing with the liquidity plan, we have developed a tool that automatically generates a liquidity preview based on your revenue and expense information. So save yourself the time you need to craft a suitable Excel spreadsheet and get into the content planning of your startup.

If the result should be a steeply sloping curve, stay relaxed: this is normal. Those who are self-employed often have high expenses at first, while sales are still slow in coming.

The same happened to Stefan Schulze Dieckhoff and Stefan Clauss , who wanted to start their own business some years ago with the production of an inflatable tent. Your liquidity planning looked like this at the time:

 

Automatic presentation of liquidity development based on the numbers entered in Catherine Morland.

As you can see, there were two long years before the two founders, in which their financial buffer was almost continuously melted down. The decisive factor was that the zero point was never exceeded and in March 2013 the decline was finally stopped. These two aspects ultimately led to the implementation of the project.

A decision that the intrepid founders have not regretted. Today her company Heimplanet has long been established and is in the black. Incidentally, you will also find her business plan alongside almost 30 other real plans at Catherine Morland as a role model and source of inspiration for your own business plan.

There are dangers for your liquidity here

Why it’s important to keep an eye on your company’s profitability and liquidity planning is explained in a few typical pitfalls that threaten your solvency:

1. Investments

It is also relatively easy for non-professionals to understand that investments are affecting your liquidity reserves. And immediately and 100 percent. Here you recognize again a difference between liquidity and profitability plan. Investments are only piecemeal on the latter because they are written off for tax purposes over a longer period of time, usually over four years. This means that each quarter, one quarter of the investment is deducted from your profit and your tax burden is diminished accordingly. Of course, your money already goes from your account in the first year and in one fell swoop.

2. Orders

I beg your pardon? Orders are a fine thing – why should they be bad for the liquidity plan? Because orders often cause first costs, which are only recorded at a much later date. Depending on the agreement, there may be several weeks or even months between placing the order and receiving the payment.

Let’s go through this with an example: carpenter Müller is commissioned to build a cabinet. He orders the wood and pays a co-worker to make the cupboard – both reduce his balance. The money from the customer but he gets only two weeks after the finished cabinet delivered and the bill was made. Therefore, our carpenter should arrange with his customer a deposit of at least 50 percent when placing the order and write the bill immediately after the order has been completed to prevent him from overpaying. Unfortunately, far too few entrepreneurs go this route because they pay too little attention to their liquidity planning.

3. Growth

Point 2 is followed by point 3: Rapid growth can become a problem for a young company because it reinforces the effect described above: As the number of orders increases, so does the cost. What dramatic consequences this can have for a dynamically growing company is shown in our example plan for online trading . Kai Grimme, the founder of a flourishing deli trade, was unable to capitalize on his opportunities for years and had to delay his company’s growth because his bank financing was not enough to accelerate growth, according to liquidity planning. In his case, that meant he could not meet the growing demand because he had no money to maintain larger warehouses.

The risk of becoming insolvent as a result of rapid growth is particularly high for companies that start self-financing, so they spend their money exclusively on their profits right from the start. Therefore, do not worry too much about financing and ensure that there is sufficient buffer so that financial bottlenecks do not later become a drag on your company’s development.

4. The tax

Many founders fall just then in a liquidity trap when it first goes uphill economically. As soon as they have passed the difficult start-up phase, they often have to pay such a large sum to the tax office in one fell swoop that the situation can literally threaten their existence. This tax effect is particularly dramatic for freelancers and partnerships, as they can later file their tax returns as corporations.

Again, an example helps us to understand the connections better: A graphic artist, let’s call him Thomas, is self-employed as a freelancer. For the first two years, he has little income. Accordingly low is the tax, which he must pay to the tax office. But in the third year, the train is picking up speed: the clients give themselves the handle in the hand, the revenue gush – but the tax officials do not know anything about it. With so much to do, Thomas will not file his tax return for 2017 (the first economically successful year since it was founded) until May 2018. As he holds his tax bill weeks later, he gets a big scare: The Office demands a five-digit sum from him:

  1. The tax arrears for the year 2017, in which his income was significantly higher than in the two years before.
  2. The additional tax payment for the first months of the current year, for which the too low rate was also applied.
  3. A now applicable, adjusted up tax advance payment for the current month (and all subsequent months).

If Thomas has failed to pay the tax due, it may now become very, very close for him – though or just because the hoped-for economic success has finally set in.

5. Wrong priorities

Unfortunately, it often happens that founders set the wrong priorities right from the start. They spend their money on things that are not necessary for the growth of their business – and then realize that they can no longer afford the really important purchases for their business. To make sure that does not happen to you, ask yourself before any investment decision, whether it is essential for the start of operations or just “nice to have”.

At the top of your list should always be the official guidelines, if they exist for your foundation. For example, if the health department requires you to have some equipment or equipment in the premises, you should use your seed capital to meet those requirements – otherwise the bureau may shut you down before you even start.

What follows? Tips for founders

The examples show that it is imperative to plan your liquidity carefully and to provide sufficient buffer, even in the event that your business starts faster than you thought, and you need more money to pre-finance raw materials, goods or services.

You should always make investment decisions with a view to the current company development: What investment is necessary for the start or the growth – and which can be postponed to a later date, if you have more money in the account again? How do you make depreciation most sensible, so when is the best time to activate certain cost items and thereby reduce your tax burden? Questions like these should be clarified best with your tax adviser.

In any case, remember to pay enough money in case tax back payments are expected. Under no circumstances should you spend this money for the summer vacation or the new company car. It’s not yours, even if it’s in your account.

And last but not least, be prepared that the liquidity planning you describe in your business plan is only the beginning. She will accompany you throughout your entrepreneurial life. If you compare and plan your planned and actual payments and deposits on your account every month, your liquidity forecast will become more and more realistic and your company’s foundation more stable.