With an investment loan, companies can expand their existing structure and have the chance of higher sales and profits. When companies want to expand their business activities, they usually do not do so with their equity, but rely on outside capital from, for example, a bank. For companies, expanding primarily means investing. In the case of service companies, new personnel have to be acquired or possibly even trained – for companies in the production of goods, the investments are primarily in the purchases and new machines or systems. Such costs are very high and often not borne by the company’s equity. Of course, such investments, which are intended to expand the company, pose a certain risk, as well as the chance of higher sales and profits.
Via an investment loan for financing
The company’s equity, even if it would be enough for the investments to be used up completely, is not very advisable. For the company, this means that they would be deprived of liquidity, which can then be lacking when it comes to settling outstanding claims. An alternative must therefore be found to finance the investment, and for many companies this can be found in the investment loan. As the name suggests, the investment loan covers the cost of investing with a loan. The repayment of the investment loan takes place in a certain period of time and should not be a problem for the company due to the additional turnover generated by the investments.
Conditions of the investment loan
Many banks offer corporate finance, including investment credit. The terms of the investment loan cannot be reduced to a common denominator, since the amount and type of the terms is an individual decision of the banks. The conditions largely depend on the following: firstly, the company’s investments, which are to be financed with the investment loan, and secondly, the company’s economic situation.
The investment loan through funding programs
There is also the possibility for companies to get their investment loan in another way. Many banks offer the investment loan, but there are also promotional offers that companies can take advantage of in such a situation. Special investment banks come into play in such support measures: These investment banks finance part of the investment loan, and the company has the advantage that the part of the investment loan that comes from the investment bank has favorable terms. However, certain demands can also be made of the company if they make use of the support programs. These demands are often geared towards maintaining jobs or creating new ones.
This will be less of a problem for service companies than perhaps for companies in the production sector, since the purchase of new machines usually results in the loss of jobs.