The lending environment in Sweden has traditionally been dominated by banks following the 2008 financial crisis. Over the last couple of years, the country’s lending market has diversified. Currently, borrowers can get funding from banks and alternative debt providers. While the domestic and pan-Nordic banks account for the larger fraction of secured lending transactions, the extra liquidity in the market and alternative funding options offer borrowers better options than previously.
Sweden is a unique nation when it comes to strengthening the startup ecosystem. The government has done excellent work in supporting the local initiatives. Besides, some lenders offer business loans that can help startups grow. Here are some of the business loan options you can choose from.
Secured and unsecured loans
Loans fall into two broad categories; secured and unsecured loans. If your lender knows you very well, convinced that your business is sound, and you will repay the loan in time, they might opt to offer you an unsecured loan. These loans have no collateral pledged as an alternative payment source in case you fail to make payments on time. In most cases, the lender who offers unsecured loans considers the borrowers a low risk. New business owners rarely qualify for these types of loans because they may have no track record of success and profitability.
On the other hand, secured loans required some form of collateral and are associated with lower interest rates than unsecured loans. If a lender writes a loan for more than a year and the loan will be used to buy pieces of equipment or doesn’t seem risk-free, they will ask you to secure the loan by collateral. The collateral used could be inventory or real estate and is expected to outlast the loan.
Often, these loans are paid back with specified equal monthly installments covering interest and principal. Installment loans can be written to meet all forms of business requirements. You will receive the entire amount when the amount is signed, and interest associated with the loan is calculated up to the last day of the loan. In case you opt to repay the loan before its last day, there will be an appropriate adjustment of interest and no penalty. It is recommended to get more info about these loans before applying.
Line-of-credit loans are the most useful to small business owners. Some financial experts believe that this is one of the permanent loan arrangement startups should have with their bankers as it protects the company from contingencies and stalled cash flow. These loans are intended for payment of operating costs for the business cycle and working capital requirements. These loans could also be helpful when it comes to purchasing inventory.
Line-of-credit loans are not intended to buy real estate or equipment. This is a short-term funding option that extends the amount of cash in your business checking account to the limit of the loan contract. Remember, each lender has its method of funding, but the amount will be transferred to your company’s checking account. Your company will pay the interest on the actual amount offered from the day it’s advanced up to the day it’s paid back in full.
In most cases, these loans are written under another name. But you can easily identify them because the full amount is received once the contract is signed. The lender requires you to pay off the interest during the life of the loan and make a ‘balloon’ payment of the entire principal amount due on the last day.
Occasionally, a lender may offer you a loan in which both the principal and interest are paid once – ‘balloon’ payment. Note that these loans are often reserved for situations where a company must wait until a particular date before getting payments from its clients for its products and services offered.
When offering interim loans, lenders are majorly concerned with the individual who will be paying off the loan and whether or not that commitment is reliable. These loans can be used to make periodic payments to a contractor constructing a new facility especially when a mortgage on the property will be used to pay off the loan.
Before you get started with any loan application, you should have an in-depth understanding and a good reason to obtain a loan for your company. You can’t just walk to a bank and request for more money just because you need more cash. Analyze your company’s financial position and only take the right type of loan that fits your business needs.