Is a non-bank business loan a suitable solution for you?

Does your business need to kick in more money? A micro-loan for entrepreneurs is not enough? In this case, it is time to start considering a loan for entrepreneurs. A bank loan is not available to you? Discover the possibilities of non-bank loans. You can often earn up to millions.

Is a non-bank business loan a suitable solution for you?

Non-bank loan for entrepreneurs – when is it suitable for you?

Non-bank loan for entrepreneurs - when is it suitable for you?

  • You have a short business history
  • You are still planning your business
  • Your past performance is insufficient for the bank
  • You have negative entries in the debtors’ registers
  • You cannot provide a tax return
  • Your business plan has not met with understanding
  • Doing business in a more risky business

Secured real estate loans / US mortgages

Secured real estate loans / US mortgages

If you don’t have a micro loan for entrepreneurs and you have a property you can guarantee, getting a loan will be easy, whether you have been building your business for years or are a start-up entrepreneur. For loans secured by real estate, the applicant will achieve a better interest rate. On the other hand, it is necessary to count on a longer approval process because of the need to assess collateral.

How exactly does a mortgage work? For you, see What is a non-bank mortgage and how to do it?

Business loan without collateral

Business loan without collateral

Given that non-banking institutions lend quite large sums, they usually demand property guarantees. If you do not have this option, the choice of companies from which you can draw credit will be greatly reduced. However, it is also possible to find companies where you can guarantee your know-how, trademarks, patents or other intangible assets.

It is therefore a solution for functioning companies that have already built a brand. This type of loan is often offered only to companies, not to small businesses.

What is needed to handle a business loan without collateral?

What is needed to handle a business loan without collateral?

  • Business plan – this is the core part of the entire application. The company will be interested in who your suppliers, customers are and what your plan is to use the newly acquired finance.
  • Tax returns – this type of loan is intended for working companies, so it is assumed that you can provide two tax returns.
  • Overview of payables and receivables
  • List of movable assets – be it machines or car fleet, do not forget to mention everything that is worth more than 200 000 dollars.

What to consider before taking a larger business loan?

  • Keep in mind that the interest rate is not everything. Find out how high fees and what a non-banking company charges.
  • Don’t try to embellish the numbers you submit about your business. If it is found that the figures do not correspond to reality, the entire loan application will fail. In addition, you run the risk of credit fraud charges.
  • If you guarantee real estate, choose the one for business rather than your own housing.

Borrowing money from private individuals – contracts, guarantees, links.

Borrowing money from private individuals – what does that actually mean?

Borrowing money from private individuals - what does that actually mean?

In difficult situations, in which banks are often unwilling to grant a loan when there is an acute shortage of money, money borrowed from private individuals can be the last resort: for example, if mortgage loans for the home cannot be serviced temporarily or if self-employment threatens to become insolvent.

The reasons, backgrounds and motivations of individuals to borrow money from private individuals can vary widely. The possibilities to negotiate trouble with actually very good friends or your own family are extremely different. This is a major disadvantage that should be considered when considering borrowing money from a private individual.

Borrow money from friends, family or friends

In contrast to a normal loan from a bank, in most cases no credit checks are carried out among private individuals such as friends or family members. You will know each other and trust each other or, because you know better, distrust. In the positive case, if the relationship of trust is coherent, you can assume that the proof of your own creditworthiness is omitted – which will certainly be pleasant for most.

Written contracts and agreements protect against later trouble

Written contracts and agreements protect against later trouble

Basically, the larger the amount of money borrowed and the less close the relationship to the private lender, the more important it is to make clear, written agreements about the credit terms.

It is therefore imperative that you draw up a written loan contract (you can find a sample loan contract in the current contract version on the right), otherwise misunderstandings and disputes may arise later, which in the worst case can end up in court. Also, or especially when it concerns your own family or best friends, the word contract comes from “contract”, and it should stay that way. So in the best case, draw up a contract during “peacetime” and sign it on both sides, ideally in the presence of witnesses.

Of course, there are also special cases: If, for example, the heir lends the nephew 1,000 USD for the purchase of a moped, which he then pounds in monthly installments of ten USD, then it may not be absolutely necessary to draw up a written loan agreement. Especially not if the money is not really supposed to be repaid.

In almost all other cases, both parties should contractually, that is to say in writing (!).

The following information belongs at least in such a loan contract

  • date
  • creditor
  • borrower
  • (including personal data) (copy of the ID card)
  • loan amount
  • running time
  • Repayment methods such as:
  • installment amount
  • Installment payment dates
  • agreed interest rate
  • Security considerations (optional)
  • Reasons for termination (e.g. if 2 installments in a row are not paid)
  • extension options
  • signatures

Alternative: Money from foreign private individuals through marketplaces such as Best Bank or Good Finance

If there is no one within your own family or circle of friends from whom you could borrow money, marketplaces such as Best Bank and Good Finance are available. This is where private individuals come together to borrow or lend each other money. Both of the above providers, Best Bank and Good Finance, see themselves as marketplaces to bring private investors on the one hand and borrowers on the other hand together.

As a borrower, you first register for free on one or both of the marketplaces. In addition, additional services can be used, but then have to be paid for. For example, in order to upgrade your own profile and to increase your chances of getting a loan, you can disclose Credit Bureau information about yourself to other market participants, and thus to potential private lenders.

The advantages and disadvantages of these marketplaces are often close to each other

The advantage is that a potential investor has more security for his investment. As a result, the creditor has a higher chance of actually getting the desired amount together. The negative on the other hand is that those who want to borrow money from a private person first have to spend money before they get money.

Possible collateral for money borrowed from private individuals

Possible collateral for money borrowed from private individuals

Even if you borrow money from private individuals, collateral can be given for the loan. Suitable for credit protection are generally all move lichen (movables) and immovable (real estate) things whose value is greater than or equal to the loan amount and the borrower has the full ownership rights and property rights.

The following things can be used as collateral, for example

  • Car (car letter)
  • Stamp collection
  • Eigentumswohung
  • bicycle
  • House
  • mobile phone
  • Motorbike / scooter
  • Jewellery
  • Clock

Possible problems that can arise when borrowing money from private individuals

Possible problems that can arise when borrowing money from private individuals

You can prevent problems from the start by borrowing only the amount from the lender that the lender does not actually need over a longer period of time. If you have any doubts, you should rather do without this loan. The same applies to your own ability to repay the loan in accordance with the agreed conditions.

If unexpected problems arise later, openness is the top priority: Both sides should seek the conversation early in order to find a solution. This can consist, for example, of deferral, extension of the term or rescheduling into a bank loan.

Tax aspects from the perspective of the private investor

Tax aspects from the perspective of the private investor

Money lent by private individuals leads to interest income from the lender, which is taxable as income from capital gains. The private borrower can deduct the interest on the debt (for example when financing a rented apartment) like bank interest if the loan is processed as if it were a third party.

Alternatives to the pawnshop

We show you other alternatives to borrow money outside of the usual banking business in our article Lending money without a bank.