Bank loans
Your own funds are not always enough and in such cases, you may need to turn to a lender. For many entrepreneurs, bank loans are the most important form of external financing. The risk involved in your business concept largely determines how much you can borrow and what security is required for the loan to be granted.
The cost of borrowing money
A loan means that you enter into an agreement with the bank. The bank requires instalments (regular payments) on loans and other forms of credit. The lender also wants to be paid for lending the money. You therefore pay interest on an ongoing basis and, in many cases, a service charge each time you pay off your loan. For overdraft facilities, there is a charge for the right to use up to a certain amount.
The bank makes an overall assessment
It is important that the bank has confidence in you as a customer, and believes that you have the ability to pay back the loan. Your personal finances may affect your chances of securing a good loan. Also review your business plan so that you have a good foundation for presenting your business. This is necessary for the bank to assess the risk that you will not be able to repay the loan.
Today, many banks also ask about the company's sustainability efforts. This allows them to assess the company's potential for growth and how well it is aware of any risks. Some banks offer lower interest rates for sustainable investments.
The bank will look at the following in your application:
- You as a business owner – experience, personal finances, references and education.
- Your business plan – whether it is realistic and detailed.
- Other owners of the business, if any.
- Whether there is an accountant or financial assistance.
For an established business, the bank will also want to see your balance sheet, annual accounts and perhaps your tax return.
You will have to provide security
The bank will need some form of security for the loan. There are different forms of security, such as mortgages on real estate, which can be residential, commercial or industrial property or land. There are also various forms of guarantee, where a guarantor undertakes to pay the debt in the event that the borrower is unable to pay. The guarantor can also be the owner of the company.
For smaller forms of credit and loans such as overdraft facilities and consumer loans, you do not always have to provide the bank with security. However, the bank always assesses the borrower's ability to repay.
This is a guarantor
A guarantor is a person who vouches for someone who takes out a loan. This means that the guarantor promises to repay the loan if the person who borrowed the money (the borrower) cannot pay himself. Bear in mind that any security provided can be used by the lender if you are unable to repay the loan! This could have serious consequences for you, your family or any other person who serves as guarantor for you or your business.
The interest rate on the bank loan works like this
The interest is the cost of the loan and is paid on an ongoing basis for the duration of the loan. The interest rate depends on the market rate, the risk level of the company and the security provided. The interest rate is usually negotiable, and there is a choice between variable and fixed. By choosing a fixed rate, the company can protect itself against fluctuations in the market rate. A variable rate follows the level of the market rate.
In addition to the interest (the cost of the loan), the loan itself must be repaid. The loan is normally repaid in instalments, i.e. you pay off the loan in equal amounts over the duration of the loan.
Different bank loans
Bank loans can finance your company's capital needs for long-term investments, but they can also help your company improve its liquidity in the short term.
If your application is rejected
There is no reason to give up trying to get credit if you are turned down the first time. Always find out the reason for the rejection. Try to evaluate the lender's reasoning.
- Are there shortcomings you can address?
- Are you able to improve your business plan?
- Is there any possibility of providing additional security?
- Can you reduce the amount of the loan?
You can also contact other lenders. It is often a good idea to talk to several banks, as different banks make different assessments and offer different terms.
Loans through Almi
Through Almi, you can apply for a loan, which, together with your own financing or a bank loan, can give you access to more capital. Business loans are available to companies with up to 250 employees and there is no upper limit on the loan amount. In many cases, a loan from Almi can be crucial to obtaining a bank loan.
Green loan from Almi
A green loan from Almi aims to facilitate a green transition in small and medium-sized enterprises. The loan can be used for green investments contributing to the environmental goals of the EU. The purpose of the loan is to stimulate environmentally sustainable green initiatives that align with one or more of the six objectives in the EU taxonomy.
Start-up loans via Marginalen Bank and NyföretagarCentrum
The start-up loan via Marginalen Bank and NyföretagarCentrum is tailored to new entrepreneurs with smaller capital needs. The loan is up to SEK 250,000, with limited security and a fixed interest rate discount. In order to apply, you must be receiving business counselling at NyföretagarCentrum. It is free of charge and counsellors are available in 200 locations in Sweden. The loans are made possible by a guarantee from the European Investment Fund.
Marginalen Bank's website (in Swedish)
Find information on bank branches in Sweden
Bankplatser i Sverige is an information service where you can search for information on bank branches in Sweden.
Bankplatser i Sverige's website (in Swedish)