A Step Before Searching for Funding Solutions and Writing a Business Plan

A Step Before Searching for Funding Solutions and Writing a Business Plan

Important things to know before searching for funding solutions for your business and writing a business plan.

Newsletter guest: The Israeli Center of Finance.

The Israeli Center of Finance is an organization that assists businesses and individuals in finding potential fund sources and in addition, assists in the capital raising process.

 Loans for Businesses:

Throughout the years in which they operate in, many businesses are required to raise funds by taking loans due to various reasons, such as establishing a new business or expanding an existing one, or in times of financial difficulties when there is a decline in cash flow. In Israel, there are three main options in which a business can receive a loan – bank loans, private loans (non-bank) and government funds. Each option has its advantages and disadvantages. However, there is no doubt that the best option would be funds that are given by the government, since their sole purpose is to assist business owners without any additional return. The best kind of fund aimed to assist small and medium size businesses, is the state guaranteed loan fund.

Private Loans for Businesses (Non-Bank):

In private (non-bank) loans, the terms and conditions are more flexible than in a regular loan from a bank, including in higher risk loans. Amongst the private loan providers there are credit companies, factoring companies, insurance companies and private funds and the process of receiving the loan from one of them is considerably shorter than the process of receiving it  from a bank, this type of loan does not affect the banks’ credit limit. However, it is important to understand that a loan from a private provider usually involves higher interest rates and faster payment programs.

Bank Loans for Businesses:

This type of loan is currently most popular in Israel. However, this option isn’t most feasible for businesses, since the banks’ loan conditions are extremely strict, which make the process much more difficult and in many cases the bank will refuse to grant a loan to a new business or entrepreneur, since they are perceived as high risk clients. In addition, banks demand complete guarantees for the entire amount of the loan and in many cases the interest rates are extremely high as well.

Government Funds for Business Loans:

The government owns funds which are aimed specifically to help fund small businesses and thus encourage economy growth. As mentioned, one of the most recommended options for small and medium size businesses is a loan provided and guaranteed by the state, which offers relatively convenient terms and conditions such as long term payment programs, a small personal guarantee and low interest rates which are usually thirty percent of the entire sum. However, it is important to advise a professional in order to apply correctly for a loan and include a business plan, a correct application is at times key for its confirmation.

It is important to remember that a professional business plan is almost always a basic condition in receiving funding of any kind.

About the Israeli Center of Finance:

The Israeli Center of Finance, Grant and Investment, provides advanced advisory services for companies and organizations while focusing on capital raising processes from government sources, bi national funds, public bids, encouragement grants, venture capital funds and private investors.