Starting a business can be a stressful and exciting time. You’ve got your business plan all set and your journey mapped out, but it’s often hard to secure the funding you need to get it off the ground.
A mortgage loan can smooth the path from enthusiastic beginnings to tangible success, offering opportunities for newcomers as well as established players who have decided to take their business in a new direction. Here are some of the situations where Nordic Hypo can help and what you should consider when taking out a loan.
When to apply for a loan
Taking out a loan is a sound decision if it serves as an investment in the future to support the long-term viability of your company. If a loan enables business growth that offsets the loan amount, it makes perfect sense to take out a loan. You can take out a loan for starting a business both to establish a company and to purchase an existing company.
Loan to establish a company
There are several reasons you may need a loan to establish a company. The main reasons are the following:
- Buying equipment needed for the company’s activities, such as production equipment, machinery or vehicles;
- Buying or renting working space, adapting the space to the company’s needs, purchasing the necessary furniture and fittings;
- Buying goods or raw materials needed for your business;
- Developing IT solutions for delivering services.
Loan to buy a company
Entrepreneurship doesn’t always start from scratch. Acquiring an existing company or purchasing a holding in a company whose field of activity appeals to you or where you see potential for development may be a viable option for achieving your vision.
A loan can also enable expansion – for example, if you want to buy a company to merge it with your existing company. This is usually the case for companies that have been operating for long enough and are in a position that makes this expansion scenario feasible.
What should you consider before taking out a loan?
Before taking out a loan, bear in mind that while a loan can help you achieve your goals, it also comes with responsibility. A loan comes with an obligation to service it, which means that the company must be able to fulfil the terms and conditions of the loan and make loan payments in the agreed amount.
Choose a loan period that fits your intended business activities. A longer-term loan is generally preferable for investments with a focus on the more distant future. When assessing the interest rate, make sure to factor in whether the loan will still be within your means if the interest rate changes over time. As entrepreneurs, we always hope for the best, but it’s important to prepare for different scenarios – if it takes longer than expected to achieve the desired results, or if there’s a temporary downturn, would that lead to financial difficulties, or would it be manageable?
Loan to start a business – what are your options?
A loan for a starting business may vary slightly depending on the type of loan you apply for. Different types of loans are available.
Nordic Hypo offers various solutions for anyone starting their journey in business.
- Loan to start a business – suitable for individuals who want to start a business.
- Working capital loan – suitable for funding short-term investments for your growing business.
- Bridge financing – suitable for companies to start new projects where the financing solutions are not yet finalised, without tying up resources needed for the company’s principal activities.
Private limited companies, public limited companies, and self-employed individuals registered in Estonia can apply for bridge financing and working capital loans.
Loan application process
Applying for a loan at Nordic Hypo is quick and easy:
- First, fill in the application form here or email your request. If possible, please attach an appraisal report or recent photos of the collateral.
- We will review your application within 1 working day and ask for additional information if necessary.
- Once we have all the information, we’ll make you a loan offer.
- If the conditions are agreeable, we’ll set a date for notarising the mortgage . This usually happens within 2–3 working days.
- The loan amount is paid out after signing the notarised contract. This will take 1–3 working days.
Reminder for loans for starting a business
What documents are required?
When applying for a loan for an existing and operating company, you should be prepared to submit an extract from the commercial register, your annual report, and your balance sheet. Among other things, you’ll have to prove that the company is registered in Estonia, is capable of paying taxes, and doesn’t have any ongoing tax irregularities. You will also be asked for details about the company owner or management board and the real estate being used as collateral, including an appraisal report prepared within the last 6 months.
When taking out a loan to start a new company or expand business activities into a new field, you will generally also need to present your business plan.
If you are a private individual starting a business, you must prove that you are an Estonian citizen or have a long-term residence permit and that you have not had any payment defaults in the last three years, in addition to submitting a business plan and information on the collateral.
What are the loan conditions and limits?
Loan to start a business:
- Offered to private individuals;
- Possible loan amount: €5,000–€400,000;
- Duration: 2 months to 10 years;
- Interest: from 9% per annum + 6 months Euribor.
Working capital loan:
- Offered to companies (private limited companies, public limited companies, self-employed persons);
- Possible loan amount: up to €2,000,000;
- Duration: 3 months to 5 years;
- Interest: from 9% per annum + 6 months Euribor.
Bridge financing:
- Offered to companies (private limited companies, public limited companies, self-employed persons);
- Possible loan amount: up to €2,000,000;
- Duration: 2 months to 3 years;
- Interest: from 9% per annum + 6 months Euribor.
Can a loan be without collateral?
The requirement for collateral depends on the type of loan and the service provider. Nordic Hypo facilitates business ventures with mortgage loans, which require real estate as collateral. In addition to collateral, companies applying for loans also have the option of providing additional sureties or guarantees.
How is creditworthiness assessed?
By looking at cash flow forecasts, financial statements, the business model, profit margins, the owners’ payment history, and collateral. In the case of starting a business, the owners’ previous business success and the prospects of the proposed project are also taken into account.
How long does the whole process take?
The length of the loan application process depends on the type of loan, the comprehensiveness of the documentation (whether everything necessary is available at the time of application), and the lender.
When you apply for a business loan from Nordic Hypo, you can be sure of a secure, flexible, and fast loan:
- It only takes a few days from the request to receiving the money
- If the value of the collateral needs to be appraised, we will do so free of charge
- It’s possible to reduce or increase the amount during the loan period
- If necessary, it is possible to request a grace period or an extension of the loan period
- Repayment of the loan before maturity is free of penalty
- We offer free financial advice both before entering into a loan contract and during the loan period
We’re happy to help you turn your ideas into reality. If you have any questions, write to us or send an inquiry and we’ll find the best solution together.