Sun. Jul 14th, 2024
business loan

Banks have several financing offers whose contracts can be spread over the short, medium and long term. Depending on the cost of the company’s project and its financial situation, a bank will offer a consumer credit, if the amount of financing requested is less than €75,000, or a mortgage if this threshold is exceeded.

For the purchase of real estate and commercial walls (premises, storage building, production plant, etc.), the duration of this professional real estate loan will be at most 15 to 20 years. Generally, the acquisition of a goodwill cannot be financed by a consumer loan with a duration of more than 7 years. That for the purchase of software and intangible resources is on average between 2 and 3 years, while a professional loan to buy a vehicle (commercial car, truck, utility vehicle, motorcycle, etc.) often has a defined duration between 3 and 5 years old.

Using factoring , a company can also duration for a business loan obtain funds from its customers’ invoices awaiting payment prematurely, allowing it to relieve its cash flow. This credit offer is classified in the category of short-term financing. The repayment period is very short because it ranges from a few days to just a few months, i.e. the time required for the company’s customers to pay the amounts due.

As regards leasing offers geared towards professionals, the duration of a contract is 3 to 7 years for the rental of material goods and a little over 15 years for the rental of Property.

The repayment period of a business loan depends on the project

The duration to repay a loan for professionals varies according to the type of project of the company, which the bank agrees to finance, and its debt ratio. All these investments require capital ranging from a few thousand to several million euros. The duration that the lending organization will submit will therefore take into account the amount borrowed, but also the amount of a personal contribution.

In summary, the loans intended for companies and leaders are requested to succeed in concretizing a large number of needs. The total amount of the investment has a certain impact on the repayment term. For example, these projects can be:

How is the repayment period of a business loan determined?

Beyond the project, it is important that the bank’s analysis looks at the professional’s repayment capacity and overall financial situation. This study, conducted by an expert, is a rigorous evaluation phase that will make it possible to estimate the level of solvency and indebtedness of the company. Through his market study, the expert will judge the dynamism of the sector in which the professional is positioned, the intensity of his competition and above all the market shares he currently holds.

Thus, according to the data collected, the state of health of the company and its prospects for the evolution of its business over time, the bank will direct the professional towards an appropriate credit offer, while submitting a repayment period. specific and a more or less high interest rate. Namely that it is important to choose a duration as short as possible to reduce the total cost of professional credit which can increase considerably depending on the number of years. Comparing borrowing rates over several durations remains the best solution.

The duration of a credit intended for a company is an essential indicator here because it makes it possible to calculate the amount of the repayments (monthly, quarterly or annual) according to a borrowed capital. To limit the risks of non-payment during the life and until the end of the contract, the bank will do its best so that the company is able to pay its installments, without however that they come to degrade its financial stability.

The duration of a depreciable pro loan is therefore determined according to the amount of the monthly payments desired by the company, but also by the bank’s desire to preserve its cash flow so that it can sustain its activity. Nevertheless, the duration of a professional financing must be fixed with a good balance to limit the total cost of the operation. Indeed, the longer the duration of the financing, the greater the interest that the company must pay to the lender.

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