Based on the situation and financing need, LoanStreet will determine what would be an appropriate financing solution for the company.
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Are you wondering what the differences are between the various forms of credit? Below we have given an explanation of the different financing options.
Loans are granted for a limited time for a specific need, this might include the purchase of new inventory or vans. You can also finance the renovation of a commercial building with it.
The total amount of a business loan is usually paid at once to the business account. Then you pay a fixed monthly amount of the loan back over a given period. The loans offered by our lenders typically have a minimum maturity of 12 months and a maximum duration of 60 months, unless it concerns financing for real estate, which often has a longer duration. This is ultimately determined in consultation with the lender, and based on your needs and repayment capacity.
An overdraft is a form of credit that allows you to withdraw money from your business account with a certain limit. The overdraft is usually linked to the business bank account. The main feature of an overdraft facility is that you can withdraw cash up to the limit of the account, and for an indefinite period.
It is becoming more common for an entrepreneur to choose for lease as the solution to finance equipment or cars. An advantage of lease is that it's mainly based on the value of the object, instead of the performance of the company. Depending on the lender that provides your company with a lease solution, there are different durations that can be chosen. To prevent that you are repaying a corporate asset that has been depreciated, the duration will not exceed the economic lifespan of the asset or car.
Factoring - also known as invoice financing - is a flexible loan based on your accounts receivable. The party offering factoring provides you with money based on your outstanding invoices. The factoring company pays you as an entrepreneur directly, and the factoring company will receive the amount of the accounts receivable. Usually, the factoring company receives a discount for the risk they take, so that you as an entrepreneur receive a slightly lower amount. The advantage is that you do not need to wait until your invoices are paid and therefore, you will have more cash instantly.This makes it possible to grow your company earlier, pay creditors faster or make an investment.
With a bank guarantee you can guarantee trade partners and suppliers that they will always be paid for services rendered. When you as an entrepreneur do business with a supplier, the supplier may require security in the form of a bank guarantee. With a bank guarantee, you as an entrepreneur give the bank the right to block the amount you have to pay - also called guarantee fee - on your bank account. The supplier will get the confidence he always gets paid for the goods.
As an entrepreneur, you have the advantage that you do not immediately have to pay the invoice amount, but only on delivery. This reduces the risk to zero for you as an entrepreneur that you don't get the goods delivered.