Consist of the cost factor
A loan does not only consist of the cost factor interest, rather a borrower needs information about the interest rate, the loan term as well as about the number and due date of the installments. In addition, there are loan commissions and any other additional costs. In principle, all fixed assets such as buildings or machines should be financed with equity and long-term debt. At the same time, the loan term should correspond to the life and useful life of the financed investments. Therefore, machines should not be financed through a current account credit.
Many self-employed people try to extend the repayment of a loan as long as possible, especially in the initial phase of their self-employment. In this way an attempt is made to improve one’s own solvency. However, it is forgotten that every repayment extension also makes a loan more expensive. The same applies to investment loans that are too high. These too can quickly jeopardize the company’s success due to the interest burden and the high repayment rates.
If you need capital, you should contact customers or business partners before the bank conversation, because many of these people are looking for a lucrative investment. In addition to the granting of profit participation rights, such capital investments are also silent participations, limited partner interests, participation certificates or bonds. The advantage for the business partner: he participates in the entrepreneurial success that was achieved with this money. In this way, customers and business partners are financially connected to the company in the long term. However, before business partners get in, they critically examine sales and earnings expectations. Furthermore, a demonstrably functioning accounts receivable management system and useful controlling are expected within the company management.
These control instruments are particularly important in the initial phase of self-employment, because this is the only way for young entrepreneurs to receive all comparable information on their current and current plans. From this, all wrong decisions can be recognized quickly. Because whether bank loans or participations: they always have to be serviced, no matter what the economic situation of a company looks like. If you also have an impeccable credit rating, you also pay much cheaper interest because of its cheaper rating. Of course, this also applies to all promotional measures by the Capital Lender (CL).
Financing for small businesses is problematic. Here, the complex rating does not pay off, nor do CL funding programs help. Because even with support programs, the house bank must first be convinced of the idea in order to issue a loan. Even small entrepreneurs with a poor credit rating still have a chance if they offer enough collateral, but in many cases this should not be feasible. If the probability of default is too high, the loan application is often only rejected. In this phase at the latest, the self-employed have to rethink. Now, in addition to the necessary transparency, the necessary information flow must also be created.
At the same time, this requires the young entrepreneur to professionalize all corporate structures and processes in order to gain business know-how. The credit institutions themselves will not help here, rather this necessary basis must be created by the company director alone.
The same applies to entrepreneurs: avoid over-indebtedness
Those who are self-employed also set up a business account in addition to their private checking account. There is no obligation to separate the law, but a clean division of the respective payment transactions always makes sense. In order to show a flawless determination of profits, a separation is even indispensable. Opening an account itself is not a problem in most cases; the self-employed person must legitimize himself with his ID card and submit a business registration. Depending on the legal form of the company, an extract from the register and the tax number are also required. Freelancers should first ask about a private checking account, because in most cases this is cheaper than a business account, which almost all bookings are already included. Self-employed people who only make a few bookings a month should prefer an account with a low base price. On the other hand, if you have a lot of sales per month, you better pay attention to low item prices.
Anyone who has had good experience with their private bank for a long time with regard to their private account can in many cases also receive significantly more favorable conditions for their business account. Because the longer the business relationship and the better its development, the greater the chance of negotiating the terms for your own benefit. It is also important to have regular, honest, but also confident personal contact with bank employees. This applies all the more in times of unexpected bottlenecks. Should the bank nevertheless refuse, the exact reasons must be asked so that the next conversation with another bank can be better prepared.
Credit check for a current account credit
Opening an account is only the first hurdle for the self-employed. The next is the current account credit. The check is carried out either on a case-by-case basis, individually or varies depending on the customer. In this context, the Schufa information reveals how many accounts, credits and credit cards a customer has, but also points out account or credit terminations or an application to open insolvency proceedings. The bank information records existing loans, their collateral, the regularity of the account details and is created by the house bank. This also includes whether the customer adheres to the agreements made. The customer, on the other hand, draws up a self-disclosure, ie what income he has, how high his assets are and what burdens he has.
The business evaluation (BWA) provides monthly or quarterly information about the economic status of the customer. It is replaced at the end of the year by the income surplus calculation or the annual accounts. The income statement is only part of the annual financial statements. Both the customer’s private assets and a transfer by way of security (e.g. business assets, machinery or assignment of claims) can be used as collateral for a loan.
Alternative to the bank: Loan through life insurance
An alternative to regular consumer credit is the policy loan. Anyone who has taken out capital life insurance can lend it. The accumulated credit serves as security, so the maximum loan amount corresponds approximately to the surrender value of the policy. The interest rates vary from insurance to insurance. In addition, there is no separate credit check for the policy loan. The insurance contract, however, continues to run unchanged, ie the customer pays the premium plus the loan interest. Insurance coverage also remains in place. In the event of an insured event, the loan is offset against the insurance benefit due.
Private pension policies can also be loaned up to a maximum of the amount that would be paid in the event of death. The borrower can repay the policy loan according to his financial means. However, if the debt is only offset against the amount paid after the contract expires, then both your own and your survivor’s pension will shrink considerably.