What is a business loan?
- 12 November 2024
- Edited 15 November 2024
- 1 min
- Managing and growing
- Finance
You need money for your business. For instance, because equipment needs replacing, you want to make it more sustainable, or you want to give your business a fresh, new image. Taking out a business loan from a bank or other financier is then one of your options. If you want to borrow an amount up to €50,000, then providers also call it microfinance. Here you can read how a business loan works.
Business loans
If you take out a business loan, the amount you loan is transferred to your account as a lump sum. You then repay the amount in monthly, equal instalments. You pay a pre-agreed interest rate on the amount outstanding. The lender may ask you for collateral. For example, a right of pledge (pandrecht) on stocks, inventory, or debtors. If you cannot repay the financing, the lender can sell the collateral.
What do you use it for?
A business loan is mainly suitable for one-time, major expenses. You use it to pay for a long-term investment, that is, one that lasts longer than 1 year. For example, you use a business loan for business assets such as a new machine, office furniture, a company car, or an investment in growth and expansion.
Costs of a business loan
You will pay interest and repayment for your business loan. The amount of interest depends on a variety of factors, including the financial health of your business. When taking out a business loan, you pay the closing costs of the loan amount.
Are you going to take out a loan? Then check in advance what fees the lender charges. And compare a number of providers before making your choice. Also check whether you might be able to repay early and what this costs.
Duration and flexibility
With a business loan, the lender decides how long you will take to repay the loan amount. From a minimum of a few months to a maximum of several years. Every month, you pay back an equal part of the loan. So, the shorter the term, the more you repay each month. Repaid money cannot be withdrawn again. If you are looking for a flexible form of loan, an overdraft will suit your situation better.
Microfinance: borrowing up to €50,000
A loan for starters and existing entrepreneurs of €1,000 to €50,000 is what many providers call microfinance. The term of the loan is 1 to 10 years. You pay repayment and interest monthly.
Applying for a loan
You usually apply for a business loan online. Before you apply for a loan, check what information the lender wants from you. For example, company details, annual accounts, and bank statements.
Help with business financing
The Financing Guide helps you find your way in financing your business. Do you still have questions? Call the helpline on 088 585 11 11 or ask an expert.
