Business loans

A business loan is when a company borrows a sum of money to finance specific needs. It can be used for everything from purchasing new equipment, hiring staff, and marketing to financing an acquisition or bridging temporary gaps in cash flow.

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What types of financing are available to businesses?

There are several different types of business financing, depending on the situation. Here are the most common types:

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1. Business loans. You borrow a fixed amount of money with a set repayment period. Ideal for everything from large to small investments or for unexpected expenses.
2. Line of credit. This is similar to a credit card for your business. You are granted a credit limit and can use the funds as needed, paying interest only on the amount you actually draw down. It is a flexible solution for managing day-to-day cash flow.
3. Factoring. You sell or finance your customer invoices to a finance company and receive the funds immediately instead of waiting 30–90 days. This frees up resources and improves cash flow.
4. Business leasing. Instead of buying expensive machinery or vehicles, you can lease them. It’s like a long-term rental, and you avoid tying up capital in equipment. Grenke Leasing is one example of a company in this field.
5. Commercial real estate loans. Loans specifically designed for purchasing or constructing commercial properties. Almost always require the property as collateral.
6. Industry-specific loans. There are business loans designed for specific industries, such as dental clinics, transportation companies, construction firms, hair salons, medical clinics, trucking companies, and e-commerce businesses.

The cost of a business loan is often more than just the interest rate. That’s why it’s important to review the full cost picture before making a decision. Many lenders may entice you with low interest rates but instead add other fees. In the Financing Guide, you can learn more about business loans and how to determine what the actual cost is.

• Interest rate. The basic cost of borrowing money, expressed as a percentage. It can be fixed or variable.
• Loan origination fee. A one-time fee for administering and setting up the loan.
• Service fee. An administrative fee charged for each invoice or monthly payment.
• Late fees. Fees charged if you are late with a payment.

With Froda, you don’t have to worry about this—the interest rate is the only cost you pay for our business loans, and there are never any hidden fees. This makes budgeting easier, and you don’t have to worry about the loan ending up costing more than you expected. You can also see exactly how much the business loan will cost using our business loan calculator.

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How does interest on business loans work?

The interest rate on a business loan is the cost you pay the lender for borrowing money from them. It is almost always set on an individual basis and is based on a credit assessment of your business. We always conduct an individual risk assessment—the lower the risk we deem it to be to lend you money, the lower the interest rate you’ll receive. Factors that influence this include the company’s creditworthiness, revenue, and industry.

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Fixed or variable interest rate on business loans

• Fixed interest rate. The interest rate remains the same for the entire term of the loan or for part of it. This gives you predictability, and you know exactly what your monthly payment will be, which makes budgeting easier.
• Variable interest rate. The interest rate follows market rates and may change over time. Historically, this has often been more affordable, but it also carries the risk that your costs could suddenly increase.

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How does the repayment of a business loan work?

Repayments with Froda are automatic and are made via direct debit on a daily, weekly, or monthly basis. Each payment consists of two parts: principal and interest.

• Principal payment. This refers to the actual repayment of the loan amount. With every principal payment you make, your debt decreases.
• Interest and fees. These are the costs associated with the loan that go to the lender.

Repayment term. This is the period during which you must repay the entire loan. A shorter repayment term results in higher monthly payments but lower total interest costs. And vice versa.

At traditional banks, such as SEB, Swedbank, Nordea, or Handelsbanken, there is rarely an upper limit on how much a business can borrow. However, traditional banks often struggle to issue smaller loans to small businesses, as their processes aren’t designed for that. That’s where Froda comes in. With Froda, your business can apply to borrow as little as 5,000 kronor and as much as 5 million kronor. How much your specific business can borrow depends on your individual circumstances.

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Here are the three factors that determine how much you can borrow:

1. Creditworthiness. Strong creditworthiness indicates that the company is stable and has fulfilled its obligations.
2. Revenue and cash flow. High and stable revenue indicates a strong ability to repay debt.
3. Business plan. A well-thought-out plan for how the funds will be used and how they will generate revenue will strengthen your application.

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You can see your company’s available credit limit directly in the application and choose to apply for the full amount or a portion of it. If you don’t apply for the full amount and want to increase your business loan later, you can easily do so on My Pages.

Applying for a business loan is easy with Froda. The process is entirely digital, takes just a few minutes, and works like this:

1. Application. Fill out the application and verify your identity using BankID. The application is completely free of charge and does not obligate you to anything.
2. Credit check. Froda performs a credit assessment on your application. We use Creditsafe instead of UC, which is an advantage since multiple inquiries with UC can lower your credit score. This step usually takes just a few minutes, but no more than 24 hours.
3. Offer. You will receive a loan offer with the interest rate and terms. If you wish, you can adjust the amount and term before signing the agreement.
4. Payment. If you accept the offer, you’ll sign the agreement digitally, and the funds will be transferred to your business account within 24 hours.

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How large does my business need to be to qualify for business financing?

There is no minimum size requirement. Froda provides business loans to small businesses, corporations, sole proprietorships, and partnerships. The most important factor is a sound financial position that demonstrates the company’s ability to repay the loan.

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What requirements must be met to obtain business financing?

Requirements may vary from lender to lender, but some basic criteria are almost always the same. It’s also a good idea to compare business loans before making a decision. Here are the most common requirements for business loans:

• Registered in Sweden. The company must be registered in Sweden, regardless of whether it is a corporation, a partnership, or a sole proprietorship.
• A Swedish bank account. A Swedish business account into which the loan can be deposited and from which the repayment can be deducted.
• Recurring revenue. To assess your company’s financial health, Froda analyzes your transaction data. To do so, your company must have recurring revenue that can be analyzed.
• No outstanding debts with the Swedish Enforcement Authority. You cannot obtain a business loan if you have an outstanding debt with the Swedish Enforcement Authority. However, we may approve a loan even if you have a history of late payments, provided your overall financial situation is stable.
• Personal guarantee. Froda typically requires a personal guarantee when you take out a business loan. This means that you are personally liable for repayment if the company is unable to pay. For sole proprietorships and partnerships, the owner is always personally liable for the company’s loans and debts.

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What do I need to prepare before applying for a loan?

With Froda, you don’t need to prepare anything before applying. All you need to do is know how much you want to borrow and for how long, and have your BankID ready.