A short-term loan is the main source of extra funds for temporary needs up to 1 year. These include loans for stocks of inventories, for temporary replenishment of working capital, for capital repairs of fixed assets and other justified needs.
Long-term loan – a source of additional funds issued for a period of more than 1 year; they are intended for capital investments related to the development, modernization, rationalization of production, as well as to improve its organization and increase its intensity.
Issuing loans for enterprises – procedure
When an enterprise concludes an agreement with a bank for a loan for various purposes, the enterprise provides copies of constituent documents (other documents at the request of the bank), as well as financial statements for the last period. Based on the documents provided, the bank analyzes the company’s solvency and makes a decision on the issuance of a loan. When signing a loan agreement with a bank, an enterprise signs a letter of guarantee or pledge. The collateral provided to the bank can be property (movable or immovable), securities and other valuables on the balance sheet of the enterprise.
The agreement signed by the lender and the borrower specifies all the terms for issuing a loan, the period for which the loan is issued, the schedule of its repayment, interest rate, amount of remuneration, etc. An enterprise can receive not only bank loans, but also loans from the state, its founders, subsidiaries, etc. according to the legislation of the USA.
When receiving loans from the listed persons, the company enters into an agreement with this person on the term of the loan, the terms of repayment, the repayment procedure, as well as the gratuitousness or the amount of remuneration for the loan received. Received loans and borrowings are classified as liabilities of the enterprise.
What are the advantages of long-term loans and their differences from short-term loans?
The popularity of microfinance organizations lies due to the rapid issuance of loans and the absence of difficulties in taking out them. The client does not need to look for guarantors, collect certificates from the place of work about income, prepare other documents to receive money. Lending companies are no less stable option than a bank, but it is more suitable for short-term loans.
Terms and application features
MFIs issue two types of loans – short-term (up to 1 month) and long-term, for several months, maximum – a year. The latter can be issued to both individuals and legal entities. Companies providing long-term loans, as a rule, offer no more than $5,000. But in fact, depending on your credit history and other factors, this amount may be lower. Not many firms offer favorable terms for their clients. You can quickly get and issue a loan to a card online.
The rate from the payday lender is based on several criteria, and the key is the identity of the borrower, as well as his solvency. Also, the decision of a microfinance organization can be influenced by the size of the loan, the timing of payments. For long-term loans, one of the key factors is the borrower’s credit history. If in the past the client had problems with payments, the deadlines were missed, it is quite possible that the MFI will refuse a loan.
many MFIs have simplified the disbursement process as much as possible. However, if we are talking about a long-term loan, it is quite possible that the customer will have to come to the office.
Algorithm of actions when it is necessary to arrange a long-term loan is following:
- choosing a company. Many MFIs offer online loan service. Basically, the terms of cooperation with them are similar, however, some differences may be present. For detailed information, use the official website of the chosen.
- account registration. Enter correct personal information.
- application. Fill out the special form and send your request. Usually, on the official websites of MFIs, there are online calculators with the help of which preliminary calculations are performed. So you can immediately find out how much is due after a certain period of time.
- the MFI manager contacts the client. Representatives of the company sometimes require clarification of certain information.
Since payday organizations issue loans quite quickly, it usually takes no more than 10-15 minutes to process an application. It is possible that the MFI manager will ask the client to visit the office to sign the papers if the company agrees to the loan. Funds can be issued both in cash and by transfer to a card.
Reasons for loan refusal
Despite the loyalty of payday firms, there is still a risk of rejection. Reasons why the company may not issue a loan:
- the borrower applies to the MFI for the first time. Such firms are more loyal to regular customers. The company must trust the person. If your reputation is spoiled, it will be difficult to get money. Alternatively, you can try to take a small amount and pay off the debt in a few days, if time permits. This will increase the company’s loyalty to you as a customer.
- the client will provide incorrect data. If the information you sent to the MFI is not true, the funds will be refused. Moreover, in the future, your data will be checked more thoroughly. Attempts to deceive do not go unnoticed.
- the client still has debts on previous loans. If you have already borrowed, but have not repaid the loan, there can be no talk of any long-term loans.
Keep in mind that in case of refusal, payday lending companies, as a rule, do not explain the reason. If you are face such a problem, the first step is to check your credit history. Pay off your debts or try another lender. Organizations are interested in issuing loans, because this is what they earn, so they are usually loyal to the needs of clients.