Get Guarantees for loans, in 4 questions

If you are thinking of asking for a loan for your SME, keep in mind that you may need to present guarantees to achieve better financing conditions.

Why does the bank ask for guarantees?

The ability to generate sufficient funds to pay the fees from the applicant for financing is the central aspect that is evaluated to grant a loan.

Usually, a guarantee is requested as a compliment, to ensure the repayment of operation in case the return of the committed form is not made. Therefore, assurances should be understood as the "second" source of repayment and never as the "first."

Additionally, even if it is not a requirement of the bank, a perfect guarantee can generate a better cost (lower rate) for the borrower.

What are the most common guarantees?

The typical guarantees for registration loans in mesa can be personal or real. The personal guarantee is the simplest and cheapest in terms of costs. It is a necessary guarantee that, in general, is signed by the partners of a company. "If I endorse my company, I imply that I trust it, and this creates trust towards third parties." These guarantees are generally requested in cases of relatively short-term financing, such as working capital.

The guarantee is another type of guarantee within the personal ones. It is a commitment to return the money personally if the company does not. It is generally requested to guarantee a specific operation, reinforcing another type of primary guarantee. For example, a personal guarantee from the partners to your company may have been given, and, also, one of these partners will promptly guarantee a loan operation.

Are there other types of guarantees?

There are also other more sophisticated guarantees, but they can be useful when thinking about loans for an SME. Warrants, leasing, and SGR (Reciprocal Guarantee Companies) seek to bring SMEs closer to credit, guaranteeing the return through other instruments.

What defines the type of guarantee requested?

There are many aspects that banks take into account to define the amount and type of guarantee necessary to complete an operation. In general, the most evaluated elements are:

• the size of the loan, concerning the size of the company requesting the financing;
• the destination of the loan;
• the period required to pay the financing, which should be evident in the flow of funds presented;
• the "certainty" of repayment or justification of the projections for generating funds;
• the current and projected situation of the applicant company;
• the credit history (although it does not assure that it is sustained in the future, it allows us to know the past behaviour before the debts);
• the management of the company and its partners;
• if the guarantee is recordable (mortgages in the real estate registry, or vehicles in the automobile property registry, although other assets have individual registers).

So if you are looking for registration loans make sure about all the terms and condition before lending the loan. Because sometime loan provider hides the things