Fortunately, in today's market conditions you can realize your long-held dream - to open some kind of factory that you have been dreaming about for so long. Well, who will finance all this? We’ll talk about this today.
Investment loan concept
Any more or less large commercial bank is an integral institution of modern business, therefore financial institutions are actively involved in shaping the economic basis of many enterprises using their tools.
One of such levers is an investment loan, which is a certain amount of capital borrowed funds intended for business development and provided with the return and payment of accrued interest. The process is complex, integrated and based on several principles of the relationship between the borrower and the lender:
- When concluding a transaction, a commercial bank pays special attention not to the financial condition of the borrower, but to his intentions to invest.
- The interest on the investment loan should be significantly less than the estimated profit from the project.
- The urgency of the loan is determined depending on the period of investment payback.
- Sometimes a bank sets a grace period for compensation, in which only interest is paid.
What can I take such a loan
It is clear that not every entrepreneur’s idea can be called a long-term profitable project, therefore, sometimes financial institutions do not see the prospects and expediency in paying off borrowed funds.
But, as a rule, an investment loan is provided for the construction of various kinds of production facilities, which are subsequently intended for any material and technical equipment, transport, and the production of agricultural or food products.
In addition, the construction of facilities not intended for industrial production is also invested. It can be any kind of housing and communal funds, social and medical institutions.
Financial institutions can also provide paid financing for the construction and reconstruction of various elements of start-up complexes, whose activities are aimed at powering the population or protecting the environment.
In general, the bank itself has the right to decide whether to provide funds to the borrower - even if the purpose of the loan is not within the generally accepted framework.
Transaction participants
It is a mistake to believe that an investment loan is a transaction between a business entity and a borrower. In addition to them, there are several intermediate links and indirect participants. So, they can be classified according to certain criteria:
- direct lenders - in fact, they provide money for a new project;
- in addition, there are investors who transfer these funds to the bank if they consider the idea profitable;
- customers are those people who need this or that construction to be implemented;
- developers - persons who directly derive the project from the foundation;
- well, and where without insurance companies and guarantee funds that do the work of everyone - they insure and guarantee the repayment of the deposit.
Loan structure
An investment loan for a project is a complex complex procedure, therefore it can be divided into a list of interconnected elements, which together constitute a single coherent process.
In other words, a financial institution draws up a contract that includes:
- provision of funds;
- deduction of interest for use;
- loan period.
All of these items in aggregate for a business entity, in turn, are part of the main financial and economic activity. Thus, for some, this process is just another loan, but someone sees this as a chance to fulfill their dreams.
Stages of the investment project
Speaking about the realization of the cherished ideas of the entrepreneur in life, in which he will be helped by an investment loan, let's look at the full cycle of this process.
So, the first phase, in which any major idea of a business entity falls, is pre-investment. No decisions have been made yet, experts are simply exploring the market, their capabilities, threats from competitors and the feasibility of the project itself.
If the idea is approved, then the investment phase begins. During this period, the organizational and legal foundations for the existence of the proposed project are established, various technological elements are purchased, construction services are ordered, a building plot is bought, staff is hired. And where without tenders and other purchases - applications for participation are submitted, contracts are concluded. As a result, the project starts.
Well, the last stage is production, or as it is also called - operational. Everything is simple here - the project is functioning and gradually begins to bring long-awaited profits.
Why not do without a loan?
In modern market conditions, it is very difficult to regulate own funds in the right amount and channel, so often there is a temporary difference between the movement of cash flows, which is formed as a result of modern conditions of payment and supply. Therefore, if own funds have been advanced in production, then the company simply will not be able to pay off due to late payment by customers.
Well, a bank investment loan, in turn, represents a certain lever of economic impact on the turnover of funds, because it contributes to an economical regime in production, which is associated with the need to pay interest and the body of the borrowed amount.
And besides, interest payments are always charged before tax, therefore, in accounting, they are included in gross expenses, while dividends are taken from net profit, therefore there is a benefit for the business entity in this regard.
Investment tax credit (not to be confused with bank)
Since we are talking about investment projects, then it's time to recall what function the state fiscal service performs in this process.
An investment tax credit is provided for local obligations and profit tax and represents the so-called delay in payment of obligations to the state budget. It is clear that not just like that, and for this you still need to get the foundation.
Therefore, according to the current legislation, business entities that are engaged in the following activities are accepted for consideration on deciding on such benefits:
- introduce innovative technologies;
- carry out research work;
- fulfill a socio-economic order of national importance.
The term of an investment tax credit can be up to five years.
Is it so profitable as it seems?
If an entrepreneur has everything in order with a net profit, and it does exist at least to some extent, then you should not even invent reasons to get a delay in paying state obligations.
But if things are not so good, and the costs of the enterprise have already begun to exceed profits, then an investment tax credit is a very good solution in this situation. What is needed for this? Just declare that your business entity is introducing any innovations or is engaged in research activities.
But again, there are pitfalls in this matter: if there is still nothing to pay taxes after the agreed grace period, you will have to give the state property that was left as collateral.
