One typical way of financing a company is through a banking institution. This is a debt contracted at a bank during a period of time previously determined in the contract and that involves the payment of interest. The advantage of using this type of financing is the fact that you can develop the business without the need for transfer of a part of the company’s control.
Although, this type of funding is constrained on the business/entrepreneur’s profile and therefore might not always be accessible to all enterprises, especially in particular for the young, since these institutions ask for demonstrations of ability to repay, financial projections, etc.
Another factor to take into account when taking a loan from a bank is that there are charges for those who benefit from it. For all these reasons, this type of financing is more directed to larger companies, seeking only to expand into other markets or invest on a new product.
- Without the need to transfer part of the company’s control
- Set repayments are spread over a period of time which is good for treasury
- Can be expensive due to interest payments
- Bank may require security on the loan
- Case study about a bank loan – http://www.nibusinessinfo.co.uk/bdotg/action/detail?itemId=1075069909&r.l1=1073858790&r.s=cb&site=191&type=CASE%20STUDIES
- Case study (video) about a bank loan – http://www.nibusinessinfo.co.uk/bdotg/action/detail?itemId=1082217307&r.l1=1073858790&r.s=cb&site=191&type=CASE%20STUDIES