Sometimes, however, it happens that the company does not generate such large profits to cover all expenses related to running a business.
In this situation, the solution may be one of the forms of external financing – an investment loan. It is a banking product that enjoys considerable interest among entrepreneurs. But what can we use it for?
What is an investment loan?
An investment loan is a bank product that is targeted at companies and enterprises regardless of their size or legal status. This is a special-purpose loan that must be allocated to the development of the company. Fortunately, this concept is very broad, so we can use it in many different ways.
In order to receive an investment loan, the entrepreneur must reckon with the fact that the bank will require him to have a down payment, which is usually 20 to 30 percent of the investment value.
Investment loans are long-term loans with a loan term of up to 20 years, although of course, we can opt for a shorter loan period. The interest rate on investment loans depends on the company’s financial condition and possible risk, which is assessed by the bank.
Investment loan for fixed assets
The vast majority of enterprises take investment loans for the purchase of fixed assets. Among them, we can mention, inter alia, equipment, devices, electronics, machines, and vehicles necessary in conducting business activity. Tangible assets also include real estate acquired by the company and all other items that can help produce goods or offer services.
With the money from the investment loan, the entrepreneur can also purchase intangible assets to help him grow his business. These include patents and copyrights, as well as licenses. Their value is measurable, they have specific prices, which is why money from a loan can be allocated to them – especially if they are necessary for the development of our business.
Shares, shares, and securities
The funds obtained from the investment loan can also be used to purchase shares in another company and securities. They are a way to grow the company and increase capital. Many entrepreneurs have no idea about it, but buying securities is a good way to grow your business safely. When we use the loan, we do not have to freeze our own funds and worry about losing liquidity.
To sum up, the investment loan gives the company a lot of business opportunities. With it, we can cover most of the expenses that are necessary for the development of a company. Interestingly, we can also take out an investment loan for another investment loan, e.g. when we need a large amount and our company’s own contribution is too small. In a word, it is a financial product that every entrepreneur should know.