What is direct business lending?
Direct business lending can provide facilities to facilitate production activities or the launch of new business initiatives. You can apply for a loan and get funding directly from the lender. This type of loan is often aimed at young people or entrepreneurs who want to promote new ideas: it is a way to support the birth of new companies and potential jobs. For this reason, very often it is the public institutions that provide this type of funding: it can be the central State or local authorities, such as the Regions, or the European Union. In particular, European tenders can be a good opportunity for young entrepreneurs, especially in the field of innovation.
Let’s see what it is in both cases. As far as interest rates are concerned , very often on the market it is difficult for a new company to convince creditors to set a favorable rate (unless the bank also has its own concession program). This happens because, especially in these last few years of credit crunch, many banks do not trust the risks deriving from the launch of a new activity of which one is not sure of the success, and therefore not even of the repayment of the loan.
Often, however, public (or private) tenders that implement loans for new companies or companies in difficulty set a threshold beyond which the interest rate cannot rise: usually, this threshold is lower than the rate that should be paid on the market. In this way, the new entrepreneur can plan the start-up times with more confidence.
The other mode of facilitation for companies consists of public guarantees. To obtain any loan, solid guarantees must be presented to the creditor: a new company may be without it. For this reason the State can intervene guaranteeing the loan to the entrepreneur in person. In this regard, the Italian legal system provides for a Central Guarantee Fund to reduce the risk on the guaranteed amount up to the figure of 1.5 million euros.
Business loans can be used for the purchase of new machinery
The development of innovative projects, a change in workspaces within the company, the development of energy efficiency, the internationalization of companies, female entrepreneurship and youth, research and innovation, safety in the workplace and environmental protection.