Increasing base capital

This is finance that is used to start or develop a company. They act as an investment in underlying assets. After this, the business uses the purchased assets, thereby extracting profitable funds. They can be used several cycles in a row and have a good payback. However, without acquiring the underlying assets, it will not be possible to reach the desired level of profitability.

When using such funds, it is necessary to consider which banking product is better suited - a line of credit for the underlying capital or long-term investments. Additionally, it is necessary to be guided by a carefully developed forecast.

Increasing working capital

Through working capital, the company's activities can be carried out within one cycle. Such funds are used to finance the functionality of the company - they go towards salaries or rent, they can be used to pay taxes or invest in marketing campaigns. When personal funds become scarce, the level of output and profit itself drop. At the same time, debts to workers and the state remain. In this case, it makes sense to take a short-term non-targeted loan for individual entrepreneur business development.

Renting for equipment or transport

It is much more profitable not to purchase the required equipment for a business, but to rent it. You can consider the terms of rent with subsequent purchase or return. In this case, the funds saved on the purchase can be used as additional turnover for the company. A banking product such as leasing is suitable. There are also some peculiarities: if the business is built on the basic tax regime, you can get a tax deduction for VAT.

Closing cash gaps

Cash gaps are a temporary lack of funds in the current account. There are several reasons why such gaps appear. As a rule, this happens when the work has already been done, but no money has been received for payment. An additional disadvantage would be if the company must urgently close an account, and delay is fraught with fines. To avoid the accumulation of penalties or fines, you can use a short-term loan for individual entrepreneur business development.

You need to think in advance which credit product is best - an open line of credit, overdraft, factoring.

To quickly obtain the missing finances, it is better to use factoring. You can use credit funds freely within the limits of your personal confirmed limit.

Large finance for specific purposes

You need to choose which credit funds are best suited - a targeted loan for mortgage or for the purchase of transport. Non-targeted loans for business development for individual entrepreneurs have high interest rates. Therefore, it is worth taking a closer look at targeted lending. It is also worth additionally taking into account that if an asset was purchased with loan funds, it becomes collateral for the banking organization.

In what cases will a loan not help?

There is a clear indicator that acts as a signal that There is no need to take out a bank loan. You should never take out a loan to develop an individual entrepreneur’s business if the company’s business is going completely badly. Alas, not all entrepreneurs are able to track this condition. But an accelerated audit will help with this.

If the business is in temporary difficulties and, according to the forecast, a loan can correct this situation, you can resort to using credit funds. But if a company is in a deep debt hole and barely makes ends meet, does not have time to pay off all debts, lending will become a real trap from which the company will no longer get out.