MonthFebruary 2019

Working business loan – what is it and what is it?

Ways to obtain additional cash for entrepreneurs is not a measure. The most popular are mortgage loans, investment loans, leasing and factoring. They allow you to maintain financial stability – although sometimes there is also a remedy for all payment problems and invoices with deferred repayment date. However, business owners should additionally be interested in one more way of crediting the investment. Namely, a revolving loan. What is this form of support?

A Business loan – a chance or a curse?  

The report of the National Guarantee Fund “Financing activities by SMEs in Poland” shows that over 20 percent. small and medium-sized enterprises in the country finance their expenses from bank loans. Most often, micro-enterprises use credit support only on the occasion of investments or for securing their current expenses.  

It is true, because popular “turnovers”, or revolving loans, are one of the most convenient forms of financing current operations of the company. They can be used for any purpose: purchase of raw materials and products, settlement of liabilities, and even refinancing of debt in another bank. Read also:   Refinancing loan – what is it and when is it worth taking?   Active entrepreneurs use banking “turn-ups” also for the emerging business opportunities , but also as an intervention element in the event of problems with liquidity of expenses.

Business loan – for whom?  

As the timing of obtaining a working capital loan shows, it is not so easy … At the start, companies with a regular solvency problem can say goodbye to this solution. Such institutions, in order to be able to “fight” for co-financing at all, must have adequate security, eg real estate. In practice, they can not be premises that are usually rented by small entrepreneurs. In this way, the bank will either refuse to grant a working loan or will definitely increase its costs. What for start-ups, small business or sole proprietorship can be unworkable …  

Therefore, a working capital loan is a good solution for experienced entrepreneurs – because despite the fact that it is a product that can be selected from many bank offers, it is quite expensive. The interest rate varies from 8 to even a dozen or so percent per annum . The commission, on the other hand, remains at 0.3 to 5 percent. the entirety of the liability. To this should be added:  

  • The fee for processing the application,
  • Costs related to an increase of the credit limit or a commission for unused funds,
  • Interest for the amount paid,  
  • Additional security tailored to the type of business, e.g. mortgage, assignment or pledge.

How it works?  

Bank functions quite simply. It’s about determining the company’s credit account, a credit limit that will work, for example in a situation of temporary financial problems. Then the funds used will first be covered by future income on the account. What is important, a bank loan with a bank account requires each time a new agreement with the bank is signed. Thanks to the fact that it is a short-term commitment – taken for a period of one to three years, it is very often possible to negotiate the optimal amount necessary to meet individual needs. At times, it may even “accept the features of a revolving loan.   

A working loan can be paid out in several ways:  

  • In the whole amount or lots  
  • In the form of a revolving credit – it enables repayment of debt and automatic activation of the credit limit up to the amount set.

A better solution for small businesses? 

The solution for a typical working capital loan is a loan secured by a de minimis guarantee . Their only difference is the fact that it is paid by Bank Gospodarstwa Krajowego as part of the government program “Supporting entrepreneurship with the use of sureties and guarantees”. In this case, if the company does not settle the payment in time, BGK will withdraw the borrower from the bank. Which means that at a later stage financial settlements will be carried out between the BGK-guaranter and the entrepreneur.  

To get it, it is necessary, as with any credit – credit that has the power to her, but the establishment and corporate accounts. And this may involve additional costs for running the account.

Diversified offer of de minimis loans  

What is important, revolving loans with a de minimis guarantee are offered only to those banks that have signed a cooperation agreement with BGK. The maximum number of entrepreneurs is PLN 3.5 million, for up to 27 months. How to do it? All you need to do is submit a loan application to the bank and attach a guarantee statement to it.  

In summary, de minimis loan is a good solution for young companies looking for development capital and those who do not want to spend large sums on securing debt at the same time. It is also an optimal option for small businesses that have no chance of getting a working capital loan in the traditional form.

Working capital loan and factoring  

Factoring is often called soft debt recovery involving the collection of cash for business development from a factor. How? By virtue of the signed contract, the factorer takes over all outstanding receivables of the factoring (company) customers. Thanks to this factoring does not require additional security – because they are already unpaid obligations.  

That is why it is a good option for companies that:  

  • They issue invoices with deferred repayment date,  
  • They have a short internship,   little experience and credit history,  
  • They can not afford to secure a loan. In this case, factoring is secured by irregular invoices of the factoring agent!  

What to choose? A revolving loan or factoring? By choosing a “turnover” the borrower can count on a cheaper loan, which is associated with the lack of additional services. Factoring is focused on long-term cooperation. It is not only managing customer receivables, but monitoring of finances or managing customer accounts. Here are the pros and cons:  

  • Both services improve the company’s image  
  • In factoring is a contractor who is in arrears with payments is responsible for repayment of debt. However, in the working credit it is the borrower!  
  • Factoring offers many additional services and more support when issuing invoices. In turn, a “turnover” is a typically financial transaction and requires additional security.  

What decision?  

Bank loans are not a cheap source of financing – but sometimes they prove inevitable! In such a situation, it is worth getting a detailed analysis of current loan offers, which will help to minimize the risk related to the stability of the company. Regardless of whether the best option is a working capital loan, factoring or de minimis loan, you should always pay attention to: interest rate, commission amount and crediting time! Thanks to this, the reasonable use of these instruments will not prove to be a treacherous fatomorgan!


Business loan agreement and credit agreement


The basic business loan or business loan document is an agreement signed between two parties. The lender or lender undertakes to transfer a specified amount for a given time to the borrower or borrower, who in turn undertakes to return it along with the costs indicated in the contract. However, the business loan and credit agreement is different. What are the differences?

When you want to borrow money, we can ask someone from your family or friends to do it. We can also go to a bank or to a non-banking company, where we will also receive money for our expenses. Of course, in the latter case we have to meet certain requirements.

First of all, a business loan or a basic loan is available for those who have certain creditworthiness, but business loans for people without regular income are also available. It is worth pointing out, however, that we will not get credit, for example a mortgage or car business loan, without checking our creditworthiness first – banks are obliged to check our ability and base their decision on it.

A business loan and credit something else

Here we come to an important issue, namely that both the business loan and the business loan are completely different banking and non-banking products. Often, these terms are used interchangeably, but it is worth pointing out that they are something else according to the law.

The business loan may be granted only by the bank under the terms of the Banking Law. It is therefore necessary to examine the customer’s creditworthiness. business loans are also intentional, that is, we allocate them for a known purpose, for example, to buy a car or build a house. In addition, the business loan must be confirmed in accordance with the law in a written agreement.

On the other hand, business loans are not so demanding – we can take out a business loan for any purpose, both at the bank and in non-bank lending companies . We can also receive it from private persons, for example from a family, a neighbor or a person unknown to us through social lending services. A business loan can also be free, unlike a business loan that has certain costs. What’s more, in the case of business loans for smaller amounts – up to PLN 500, there is no need to prepare a business loan agreement.

Therefore, in the case of business loans, we have to conclude an agreement, but for business loans it is not necessary. It is worth signing it, however, even if the sum of the business loan is lower than PLN 500. At that time, the contract is a confirmation of the transaction between the parties.

What is the business loan agreement and how does the business loan agreement look like?

Generally, both the business loan agreement and the business loan will find the same information. These are the data of the parties to the contract, its subject, ie the business loan along with an indication of its amount, the repayment period, the method of repayment – equal or decreasing installments, the repayment date of individual installments. Also in the case of business loans, we will find information on the purpose of the business loan.

Credit agreements are generally longer than business loans because they contain precise provisions in accordance with Banking Law . In the case of business loans, the contract is often shorter – if any issues are not covered in the contract, then they are considered in accordance with the provisions of civil law.