Opening your own business and the hopes and prospects associated with it are a big event in human life. The development plan is often verified by market realities. How to gain a competitive advantage in such an advanced market? Which company loan should you choose?
We can divide our business activities into capital-intensive ones and those in which the cost barrier of entry is relatively lower. Activities with high capital necessary to launch them are eg the pharmaceutical industry or technologically advanced production on a larger scale.
The low entry barrier will meet the entrepreneur in the opening of a small trading point or insurance office. How do you develop the fastest in both cases? How to gain an advantage over local or international competition? It all depends on the specifics of the industry, and the entrepreneurs themselves have the best knowledge in this topic.
Company loan costs, as entrepreneurs optimize the cost of loans
When planning a business loan, entrepreneurs rightly pay a lot of attention to loan interest. Spreading cash loan financing over 10 years generates considerable interest costs in total. The larger the loan amount, the higher the interest costs go up. How to reduce the cost of loans?
Every entrepreneur running a business with a bank loan has the right to include interest on credit products in tax deductible costs, which will lead to a reduction in tax. An important issue in this case is the timely payment of interest, ie regular repayment of the loan according to the schedule sent by the bank.
The interest deduction applies to loans whose purpose was or is to develop a business. They are so-called Company loans, those generated in the company BIK. A loan held by an entrepreneur in a private BIK, taken for studies for a child will not be subject to interest deductions. In this case, the audit will undermine the correctness of the deduction of monthly credit interest.
A similar rule applies to commissions and fees charged to the loan agreement with the bank. The commission will be reasonably deducted from income if the purpose of the loan was the broadly understood development goal of the business. This is a very broad category that allows the lion’s share of credit costs to be significantly reduced. The only exception is the deduction of commission on funds obtained from loans issued for the purchase of fixed assets.
In this case, we recommend consulting individual purchasing plans with people responsible for accounting in your companies. Fixed assets can be deducted only at the stage of their commissioning, at an earlier stage they constitute an increase of depreciation write-offs. The case of commission charged on early loan repayments is in principle also deductible from income.
Most self-employed people will think that the contribution of work to deducting such costs is disproportionate to the results, calculating the accounting department in the company will definitely prove that it is worth it.
Characteristics of banking credit products targeted at companies
One of the basic goals of any business is development. That is why a special-purpose loan was created, targeted at the broadly understood development of the company. Most often aimed at increasing the company’s assets or fixed assets. This product involves more formalities for the borrower. There is a need to justify the purpose of the loan, to show that the funds obtained from the loan will directly affect the development of the company.
So if as an entrepreneur you have a specific investment idea, supported by a project or business plan, this loan will be for you. Despite a larger number of documents, it is a relatively cheaper loan, which of course is associated with an additional number of documents, such as the presentation of invoices as a proof of spending funds from the loan for investment purposes, eg
Revolving business loan
A corporate loan which aims to finance the company’s current operations. In the case of a wider scale of activity, there are slips in collecting receivables from contractors. Unfortunately, despite such turnover, the entrepreneur is obliged to pay employees on time, pay taxes to ZUS, Tax Office on time.
Therefore, a working capital loan can be successful in the event of late payments. Working capital loans also work well for larger purchases of goods in commercial activities. A working capital loan is usually granted for a shorter period, eg 12 months, and renewed if necessary. We distinguish 2 variants of the working capital loan: Current account overdraft and working capital overdraft.
An active liability on a company’s savings and settlement account, the so-called ROR. You can also find the name “debit balance”. The company loan in question is intended for any purpose set by the entrepreneur. It can be a consumption or investment goal or payment orders to employees. Each transfer that goes to a company account is a reduction of this form of credit.
Very similar operation as in the overdraft facility, however, the line is established on a separate account, other than the company one. Inflows to the company account will not be credited towards the debt, which makes financial management easier. The bank creates its customer the possibility of getting into debt, arranges with him the exact amount and time of payments, as well as commissions.
If you have any questions, want to know which company loan will best contribute to the rapid development of your company, call. Talking to our consultant costs nothing. Competent advisers who have already experienced development plans of many large and small companies will help you outline a plan for the future.