From a financial point of view, an investment loans is one of the most attractive options for young companies. History is aware of many companies that were able to expand their activities and acquire their current status largely thanks to the long-term financing received from the bank. However, the requirements and procedures for obtaining investment loans for large businesses differs.
Viola Funding Limited offers long-term financing of large projects with an initiator’s contribution of up to 50%.
Working capital loans, however, are used by many entrepreneurs, but business investment loans are an important tool for financing companies.
We at Viola Funding Limited, finance the following industries:
1) Energy sector and renewable energy sources.
2) Heavy industry and mechanical engineering.
3) Chemical industry and processing of chemical waste.
4) Infrastructure and transport, including seaports and terminals.
5) Agriculture and food industry.
6) Real estate and tourism.
Of course, in the case of newly established enterprises, the formal procedures and conditions of the loan may differ.
Contact VFL financial team to learn more about the financial packages we offer.
The concepts of investment loans
The purposes for which an investment loan is taken for a period of up to 15 years or more must be clearly indicated by the entrepreneur when applying for a loan. You cannot first receive funds, and only then decide what exactly you will do with the money.
An investment loan is a bank loan for financing projects implemented by a borrower, the purpose of which is the construction, restoration and modernization of fixed assets, as well as the acquisition of intangible assets, the purchase of shares or long-term securities.
When providing investment loans, the bank often requires the initiator’s own contribution, which reduces the risk for the bank.
Pre-conditions for obtaining an investment loans for large businesses is a positive result of investment project carried out by the bank.
The loan amount can be transferred to the borrowing company immediately or can be provided in tranches. In the latter case, the receipt of each subsequent tranche usually depends on the fulfillment of the borrower’s obligations under the previous phases.
Financing large-scale businesses and long-term projects
Working capital financing is short-term and is aimed at covering current needs and payments. It can also be used for certain contracts in order to increase market share or increase a company’s turnover.
In many developing countries, long-term projects and business ideas are often funded with working capital. A business investment loan is fundamentally different from working capital financing.
Working capital is short-term in nature.
On the other hand, investment projects for large businesses are usually planned for up to 15-20 years and involve huge investments.
However, a working capital loan should not be used to finance investment projects as long-term business needs. For this purpose, there are investment loans with special conditions and long maturities. The logic of these financial instruments is significantly different.
An investment loan for a business can be supplemented or replaced by leasing. The idea is as follows: when we talk about buying machinery, equipment or other property with an investment loan, you will need additional collateral, different from the already acquired asset.
Paying for raw materials to service the current contract is not an investment, so in this case the business must use working capital financing instruments.
If you are going to buy expensive real estate or equipment, but the company cannot provide adequate collateral, you need to focus on leasing as the optimal tool. Business investment loan will require additional guarantees.
Business investment loans for large businesses : how to get it
An investment loan is always a business-specific tool. This means that a one-time check of the current financial health of the borrowing company and its financial history is not enough. Experts must carefully analyze the activities of the borrower in order to make the right decision.
An investment loan is used for the following:
Equipment used to conduct business.
Real estate and land owned by the borrowing company.
Any other assets for the production of goods or the provision of services.
Applying for a loan is the most difficult part of the whole process associated with obtaining a business investment loan. In the case of large loans with a long maturity, banks always use advanced tools, including the so-called credit scoring.
Credit scoring in investment lending is a complex system of algorithms and financial indicators used to evaluate the borrower’s creditworthiness, as well as the risk of possible problems with debt repayment in the future.
Therefore, when applying for investment loans for large businesses, an entrepreneur will have to prepare the following documents:
Detailed, professional and sound business plan.
Reports confirming the financial health of the company.
Documents from the national court register.
Statutory documents, etc.
The above requirements will apply to any business investment loan.
Based on the definition, investment loans can be used to purchase so-called fixed assets, intangible assets, shares and securities.
Finally, your company must demonstrate financial success by growing dynamically and consistently. So the bank guarantees timely debt repayment.
It is critically important to convince the bank that the costs you are planning are of an investment nature and, in addition, will bring significant benefits to the company and its partners.
Interest rates and conditions for Investment loans
Some banks provide funds on simpler terms, but obtaining a business investment loan without an initial deposit is a difficult task. As a rule, business lending is associated with a very high risk for the bank. Taking even more risk by providing loans to an entrepreneur who cannot afford to pay 10-20% of the project cost is highly unlikely.
What is the interest rate and general financial conditions of an investment loan for a business?
In most cases, the cost of the loan will consist of the standard loan processing fee and interest.
It all depends on the conditions contained in a particular loan agreement.
In the current market conditions, the issuance of investment loans entails a greater risk for banks than before. This means that the bank can, for example, offer a lower interest rate, but this will shorten the loan maturity.
When choosing a business investment loans? what to look for
Factors to consider when choosing an investment loan:
Credit insurance.
Loan application fee.
Loan activation fee.
For this reason, you should carefully study the terms of the loan. Apart from the interest rate (for example, EURIBOR and margin), experts highlight other elements that need to be checked.
Banks usually offer different fees. For example, some institutions do not charge an application processing fee.
Bank margin is negotiable. Thus, the client can negotiate a lower cost of the loan. The amount of margin is calculated by banks by determining the credit risk and financial health of the company.
What else is important for the borrowing company:
Terms of repayment of the investment loan.
Time of consideration of the application after submission of documents.
Loan collateral: whether collateral is required and in what form.
Maximum amount of financing (usually 80-90% of the project cost).
Prohibited clauses made in the contract contrary to the law.
Possibility of early repayment of the loan and its consequences.
Below is a summary of the most important information about a business investment loan.
An investment loans is provided for a period of 1 to 20 years.
Since this is a business loan, there may be an early repayment charge (ERC).
The initial contribution of the borrower is usually between 20 and 30%, although there are investment loans that cover up to 90% of the project cost.
The provided funds can be used for the development of the company in any way, including the purchase of fixed assets, intangible assets and others.
The success of negotiations with banks largely depends on the current financial performance of the company and a well-written business plan.
The method of repayment of the loan depends on the agreement with the bank.
Viola funding limited is ready to meet your business needs.
eMAIL:[email protected]