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Company loan – what can be included in costs?

A corporate loan facilitates starting a business and supports its development, but also a burden. Are you a young entrepreneur? Do you have new ideas to extend the scope of services? Check how to reduce your credit burden.

Decide on a business loan for any purpose if you need cash to finance your business. We suggest which part of the loan can be included in costs.

Company loan – how to reduce the financial burden?

Company loan - how to reduce the financial burden?

Fears of problems with paying off a company loan effectively prevent you from starting your own business or taking bold steps related to its development. You too? Well, the entire company loan is not a tax deductible cost, but the interest portion is treated as an expense.

You can deduct all fees associated with granting or servicing the loan. Getting a loan is not always easy, because it all depends on your creditworthiness, and this, in the case of companies just entering the market, seems a difficult barrier to overcome. If you’re just starting out, take a business loan for starters. You will deduct the cost of the loan for losses as you would any other company loan.

Which company loan should you choose?

Which company loan should you choose?

The start loan is for companies in the early stages of business development. This means that it can be used by young entrepreneurs who run a business for no more than 6, 12, sometimes 24 months – it depends on the individual arrangements of the bank. Among the offers for companies, credit for new companies is an increasingly emerging product. At a later stage of business development, it is easier to access other types of loans such as:

  • Working capital loan for companies.

Provides financing for day-to-day business expenses. It is helpful when there are problems with timely settlements with contractors, but also allows you to purchase the necessary goods, inventory or means of production.

  • Investment loan for companies.

It is used to finance investments related to business development. It may cover the purchase of real estate, equipment or materials. To take advantage of the offer, you must provide the bank with financial documents and an investment business plan.

  • Overdraft facility.

This is extra money on your company’s account that you can use at any time. Interest is calculated only on the amount used, and each repayment means that you can use the same money again. It is a convenient loan for small businesses.

Company loan – interest as the basic cost

Company loan - interest as the basic cost

If you are looking for the right financing for your business, you are definitely looking at the interest rate on business loans. The higher the interest rate, the higher the interest – and this, with large amounts, puts a heavy burden on the budget. However, you can reduce the cost of credit for companies because you have the right to include interest in the costs of doing business, which will reduce the amount of tax.

The tax deductible expenses are only interest that has been paid. Therefore, the interest rate on business loans does not have to be the lowest in order to be profitable for you. Remember that the loan cannot be used for purposes other than conducting business.

Do not miss: What is a working capital and investment loan?

If company loans are intended for the purchase or construction of real estate, it must first be put into service so that you can write down.

Company loans – commissions and other fees

Company loans - commissions and other fees

Low interest rates on loans do not always mean the cheapest loan for companies, because its cost is increased by commissions and other bank charges. The good information is definitely that all fees associated with taking a loan and paying it off can be included as operating costs.

Credit insurance is also deductible – provided it is not the life insurance of the borrower. If you pay a loan commission for the purchase of a fixed asset, you will only deduct it when the fixed asset is put into use.

This will come in handy: Calculate your credit standing with the help of a calculator

Until then, the commission increases the value of the asset, which translates into an increase in depreciation charges. Before making your final decision, it’s a good idea to make a simple business loan comparison to select the best offer available.

Corporate or consumer loan?

Corporate or consumer loan?

Not very good credit history and low profits from your business means that when you apply for a business loan you can hear a refusal. If you have financial problems, you can reach for non-bank offers, because credit for indebted companies is a rare product in banks.

Unfortunately, non-bank loans have a high interest rate. In quick- loan institutions you can get a loan for companies without certificates, but you have to take into account very high interest rates and a relatively short repayment period.

Is there another way out? Yes. One alternative is to use consumer credit for individuals, which is easier to obtain. You can count it as operating expenses, provided that it is actually used for business purposes and properly documented.

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