What is a business loan?

Business loans

If you take out a business loan, the amount you loan is transferred to your account as a lump sum. You then repay the amount in instalments. You cannot again withdraw money you have repaid. You pay a pre-agreed interest rate on the amount outstanding. The lender may ask you for collateral. For example, a right of pledge (pandrecht) on stocks, inventory, or debtors. If you cannot repay the financing, the lender can sell the collateral.

What do you use it for?

A business loan is mainly suitable for one-time, major expenses. You use it to pay for a long-term investment, that is, one that lasts longer than 1 year. For example, you use a business loan for business assets such as a new machine, office furniture, a company car, or an investment in growth and expansion. You can also use a short-term business loan to pre-finance VAT. For example, if you are purchasing stock.

Costs of a business loan

You will pay interest and repayment for your business loan. The amount of interest depends on a variety of factors, including the financial health of your business. You sometimes pay the closing costs of the loan amount.

If you are going to take out a loan, check in advance what fees the lender charges. And compare a number of providers before making your choice. 

Duration and flexibility

With a business loan, the lender decides how long you will take to repay the loan amount. From a minimum of a few months to a maximum of several years. Every month, you pay back an equal part of the loan. So, the shorter the term, the more you repay each month. Repaid money cannot be withdrawn again. If you are looking for a flexible form of loan, an overdraft will suit your situation better.

Who is a business loan for?

A business loan is suitable for companies that want to make a one-off investment and are financially healthy enough to repay the loan.

Microfinance: borrowing up to €50,000 

A loan for starters and existing entrepreneurs of €1,000 to €50,000 is what many providers call microfinance. The term of the loan is 1 to 10 years. You pay repayment and interest monthly.

Applying for a loan

You can apply for a business loan from banks, online lenders, and other financiers. You usually apply for a business loan online. Before you apply for a loan, check what information the lender wants from you. For example, company details, annual accounts, and bank statements. Take the following steps to apply: 

• Determine the amount of the loan: think about how much money you need and what you want to use it for. You can describe this in a business plan. In the plan, you explain your financing needs, goals, and strategies.
• Compare providers: find different banks and other financiers and compare their loan conditions, interest rates, and costs.
• Submit your application: complete the (online) forms and provide the requested documents. Such as your business plan, financial statements, and tax returns.
• Assess the price quotations: compare the quotations based on interest rate, terms, conditions and flexibility.
• Choose a provider: make a choice based on your assessment and contact the chosen lender.
• Sign the loan agreement: read the agreement carefully. Ask questions if something is not clear and sign the agreement if you agree.

Tip: Check in advance what fees a lender charges. Compare a number of providers before making a choice. Also check whether you might be able to repay early and what this costs.

Help with business financing

The Financing Guide helps you find the financing that suits your business. Do you still have questions? Call the helpline on 088 585 11 11 or ask an expert.