How You Can Get a Loan to Expand Your Business in Germany?

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Running a business is not an easy task, and in the current context of geopolitical turbulence and policy intricacies, it is even more difficult. There are a lot of regulatory compliances in Germany which need to adhere to stringently. Several aspects like taxation, exports, trade finance, capital expenditure, manpower planning, raising money, production control, debt repayment, marketing, and advertisement, filing returns, entertaining shareholders need to be taken care of. In a nutshell, you have to manage everything simultaneously to grow your business.

What About Your Expansion Plans?

After a few years, there comes a time in your business when you feel the need to take it to the next level. This up-gradation is necessary to cater to a broader customer base and thus fetch more profits. Expanding to multiple territories (in the same or different countries) enhances your brand visibility. Businesses in Germany can easily trade with its other European Union (EU) partners. It is the time of introducing newer products and brands based on the market research of the new territory.

But Hang on, Where Will You Get the Capital from for This Expansion?

You can go for a loan from the traditional route via banks. However, if your Schufa score i.e., the credit rating of a company, is substandard, your loan application will be rejected. This will further exacerbate your Schufa rating, making it even more challenging to get credit from other banks as Germany is a credit conservative country. Apart from this, the paperwork, income proof, permanent residential status, guarantor, and collateral requirements are other problems associated while borrowing from banks. You will need the money anyway for your expansion or meet any unforeseen cash outflow in business, and banks have closed their doors.

Is There a Solution to this problem? 

What if you don’t meet the eligibility mentioned above criteria? Can you still get a loan to fund your business expansion plans? The direct answer is yes. There are many options these days to get credit without proof of income in Germany. These lenders look beyond your Schufa profile in deciding whether to lend you or not. Even if the banks have rejected your loan application, these lenders will give you a loan.

Let’s get to know these loans in detail for a better understanding, which will help you to decide whether these loans are right for your business or not:

  • The lender in these loans usually will not even ask for your credit report when you apply for a loan. This is because they don’t assess your borrowing history to decide your creditworthiness.
  • The lender can ask for your bank statements to analyze your business’s transaction history. They usually look for the business income, expenses, and any overdraft facility being used.
  • In order to be eligible for these types of loans, the applicant should have a demonstrated history of business income in the last 3-5 years. This is evidence that the applicant will be able to repay the loan from the cash flows in the business.
  • These loans without Schufa and proof of income do not ask for a security to be pledged as collateral against the loan or a guarantor to be produced.

Have You Thought of the Risks Involved In These Loans?

Though there is not any significant risk involved in taking these loans, you need to consider certain factors before applying for such loans. These factors are listed below:

  • It is your responsibility to do a background check of the lender about his history and reputation in the industry. The lender should hold a valid license and is governed by the regulator.
  • Another essential aspect to consider is interest rates. The caveat here is that the interest rates on these loans will be significantly higher as the risk involved in lending is higher.
  • Read the entire loan agreement with all the terms and conditions in detail and question the lender any clause which you did not understand. Also, check for any hidden fees, processing fees, late payment penalty to be paid.
  • If the expected operating cash flows from the business are going to decline going forward, then avoid applying for this loan and postpone your business expansion. This is because the interest outgo in the form of installments will be significant.
  • Though this option of credit without proof of income looks lucrative as it ignores the Schufa score, but avoid applying for such loans multiple times. This is because this rejected loan application shows up on your credit profile.

There are many digital banks, peer to peer (P2P) lending institutions, micro-credit companies, mobile-only banks, and private investors in Germany, offering these loans to businesses. The loan application process is entirely online, which involves filling an application form and upload some documents that take less than 10 minutes. They give an instant decision about the status of your application, and the loan amount is transferred in your bank account on the same day.

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