Fund a small amount quickly

Credit or loan: what is the difference?

Do you want to borrow money for your business quickly? There are 2 solutions. A business credit or a business loan.

Business credit

With a business credit, a financier gives you access to a sum of money. You can withdraw money or be in the red up to a fixed maximum amount. You decide when and how much you withdraw. You only pay interest on the amount withdrawn. Every month you pay off part of it. You can withdraw it again when you need it. A flexible credit like this is suitable when you need working capital. 

Business loan

With a business loan, you receive the entire loan amount in one go in your bank account. You then repay the amount in monthly, equal amounts. Money you have repaid cannot be withdrawn again. You pay a pre-agreed interest rate on the outstanding amount. A business loan is suitable for a one-off investment or for bridging capital.

Tip: Borrowing money costs money, and you have to repay the borrowed amount with interest. Make a financial plan so you know what this means for your business .

Can you free up money yourself?

Before taking out a loan, check if you can free up funds in your business. Then you can borrow a smaller amount. These are the options:

• cut your costs
• take advantage of tax deductibles
• ask your clients to pay faster
• see if you can borrow money from family or friends

Where can you borrow for your business?

Financiers offer different forms of bridging loans. Think of an overdraft,  flexible credit, or factoring.

1. Banks

You can apply for an overdraft from a bank. This allows you to be in the red up to a certain amount. Do you temporarily need more money? Then you can temporarily increase the current financing.

There is also a special government guarantee, the SME Credit Guarantee Scheme (BMKB). Banks and non-bank financiers can apply for this on your behalf for an overdraft or bridging loan. This allows you to borrow more money from the bank than you would get based on your collateral.

2. Credit at Qredits

Qredits offers flexible credit and microcredit.

• Microcredit: a microcredit is a loan of up to €50,000.
• Flexible credit: a flexible credit is a type of overdraft of at least €5,000 to a maximum of €25,000. You can combine it with other loans from Qredits. For example, a microcredit, SME loan, leasing, or mortgage loan.

3. Online financing via fintech

Fintech stands for financial technology. Fintech financiers organise the financing process with online technology. They usually offer temporary financing for working capital or bridging loans. These are loans from €5,000 to €250,000 or higher. Are you looking for a loan for a short period, that you often get within a day? That's called a flash credit. The interest rate for a flash credit can be high. So compare the costs and conditions for each provider and calculate everything before making a decision.

4. Factoring

In factoring and invoice financing, a bank or factoring company gives you a certain form of credit. a bank or factoring company gives you an advance on invoices you have sent. You do not have to wait for your customer to pay. This is for business-to-business transactions, not consumer invoices. With some factoring companies, you can get an advance on invoices as low as €100.

Invoice financing works slightly differently. With invoice financing, you sell outstanding invoices to a funding company. However, you take care of collecting these invoices from your buyer yourself.

Factoring companies are united in the sector organisation Factoring Nederland (FAAN) (in Dutch).

5. Pin advance and web advance

A pin advance is attached to an ATM in the retail and hospitality industry. You get an advance on the expected turnover. This can be done with amounts from €2,000 to €50,000. Every day, a percentage of the turnover goes to the lender as repayment. Do you have an online shop? Then you can get a web advance for the same amounts.

Tips on borrowing money

Are you going to borrow money for your business? These tips will help you prepare:

• Make sure your records are up to date and correct. 
• Compare offers from at least 3 lenders before making a choice.
• Check if the financier has a quality mark and belongs to a sector organisation with a code of conduct.
• Convert the loan rate to an annual interest rate. The guideline is a maximum of 20% per year. 
• Read the loan proposal carefully. Also the small print. 
• Ask how quickly you can expect the money.

What else you need to know

Do you want to apply for funding? Use the information in the Finance Guide. Or call the KVK Advice Team on 088 585 11 11.