Business loans are a standard feature in the Swiss business landscape. Here, moneyland.ch lists the most important things to consider when choosing a business loan.
1. Compare interest rates
Unlike personal loans, business loans are not governed by Swiss consumer credit laws. As a result, business loans are less regulated and lenders are not limited by a maximum legal interest rate as they are when granting personal loans. Depending on the lender and the creditworthiness of the borrower, business loans may have interest rates in excess of 15% per annum. Because of this, comparing interest rates thoroughly is crucial to getting maximum value from a loan.
2. Compare additional fees and charges
Consumer credit laws require lender to include all fees and charges in the effective annual interest rates listed for personal loans. This is not the case with business loans. Many lenders charge additional fees on top of interest charges. In Switzerland these fees are usually called “service fees”. Depending on the business loan in question, these may be charged as one-time fees or as regular, recurring fees. In some instances, additional fees may even be higher than interest charges.
3. Compare combined costs
Interest charges and administrative fees can vary based on the creditworthiness of your business, the loan amount, the loan term and other criteria (business profitability, revenues, business type). Some lenders only charge recurring fees, while others charge one-time fees in addition to recurring fees. The way in which interest and fees are calculated varies widely between lenders. Comparing total interest and administrative charges to find the full cost of loans is important. You can do this using the moneyland.ch business loan comparison tool.
4. Amortizing or non-amortizing?
Personal loans like cash loans which fall under consumer credit laws are always amortizing loans. That means you pay off the loan throughout a limited loan term. Business loans may be amortizing or non-amortizing. Some Swiss lenders offer amortizing business loans. Other lenders offer non-amortizing loans. Some lenders offer loans of both types, but with differing terms and conditions. Comparing costs can help you find the most affordable option for your financing needs.
5. Get quotes
The cost of business loans is heavily dependent on the creditworthiness of the business in question. The business loan comparison on moneyland.ch shows the minimum and the maximum interest rate applicable to each loan and also lists administrative fees. After performing a comparison, make sure to request quotes in order to find the exact interest rates which your specific business will pay for each loan. Different lenders may rate your creditworthiness and other factors differently.
6. Negotiate fees
The personal loan market is heavily regulated, leaving little room for negotiation. But the fees and interest charges of business loans are negotiable to varying degrees. Getting quotes from multiple lenders and using these as bargaining chips to negotiate a better deal is often effective. It is important that you understand the basic cost structure of Swiss business loans in order to negotiate effectively.
7. Consider alternative lenders
Banks are not the only lenders in Switzerland. In recent years, a number of online lenders have established themselves in the Swiss business lending market. Many of these are peer to peer (P2P) lending platforms which allow private investors to invest capital which is lent out to borrowers. The loan platforms handle administrative tasks and credit checks. It isn’t uncommon for online lenders to provide business loans to borrowers which have been rejected by conventional banks due to strict regulations.
8. Choose short loan terms when possible
The same logic applies to business loans as applies to personal loans: The shorter the amount of time it takes to repay the loan, the cheaper the loan will be. The costs of many business loans increase at a disproportionate rate when you choose a longer loan term. In many cases, the costs of long-term loans are raised at regular intervals across the loan term.
9. Beware of disreputable lenders
Numerous con artists offer business loans on the Internet. Most of these target struggling individuals, but businesses also fall prey from time to time. Disreputable lenders typically target businesses which are unable to obtain financing from conventional lenders. Stick to the reputable Swiss lenders included in the moneyland.ch business loan comparison.
Business loan comparison