We explain and clarify the concepts of credit, economics and finance.
The capital injected into a company by its owners. The size of the share capital is regulated in the company's articles of association. The minimum amount required to start a Swedish limited company is SEK 50,000. This means that when you start the company you must have either a bank certificate confirming that you have paid in the share capital, or a certificate from an accountant stating that you have contributed assets, such as computers or cars, worth SEK 50,000 or more. You do not have to keep the share capital in the bank, but can invest the full amount. When you make a profit or loss in your company, the share capital is not affected, but the equity is. Nor does the distribution of profits affect the share capital. Remember that if your equity is less than half of your share capital, you must draw up a trial balance. If equity is not restored, the company must be liquidated, otherwise the board of directors may be personally liable.
The share capital can be increased by a new issue (i.e. by issuing new shares) or a bonus issue and reduced by a reduction of the share capital (but never to less than SEK 50,000). The advantages of increasing the share capital are that you can obtain a higher credit rating. The disadvantages are that you are prevented from distributing money if there is not enough free equity.
A bank has a licence from Finansinspektionen to conduct banking activities under the Banking and Finance Act. There are about 120 banks licensed to operate in Sweden. The number has remained fairly stable over the past 15 years. The banks' business idea is simple: to borrow money cheaply (i.e. savings account with low or no interest) and lend it out expensively. This is called net interest income. On top of that, there are various bank charges and commissions. In total, banks have borrowed around €3.5 billion and lent €1.3 billion to businesses. The Swedish market is dominated by the four major banks Nordea, SEB, SHB and Swedbank.
To become a bank, you need a licence from Finansinspektionen. The rules are very extensive and complex. In addition, Finansinspektionen imposes many requirements on banks, such as risk and capital adequacy. As a result, banks want to take as little risk as possible and prefer to work only with large corporate clients.
It is a record with a credit reference agency that a person or company has not paid on time. A payment notice is issued when a case is referred to the Enforcement Authority for determination. To avoid payment notices, you should be careful to pay your bills on time. Unfortunately, even a payment notice can make life difficult for you as a business owner.
If you believe that the person who sent the invoice has sent incorrect claims, you should make a dispute. Clearly state why you are disputing the invoice. The case will then go to a public court to decide. There is a risk that you will incur further costs if it turns out that the invoice was correct. Therefore, only dispute invoices that are really wrong and try to reach a settlement with the person who sent the invoice.
Read more about how you can get a business loan despite a payment record on loans to businesses with payment records.
Order for payment
Anyone who has a debt that is not paid has the right to go to the Enforcement Authority and ask for enforcement, i.e. for the Enforcement Authority to recover the debt.
This is done by applying for an order for payment. To be a valid claim, it must
1. Be a demand for money (i.e. not a loan of, for example, a lawnmower)
2. Be negotiable (i.e. that you could come to an agreement)
3. Be due (i.e. you cannot go to the Enforcement Agency before the due date)
The person who has lent money / has a claim is a creditor. Other words for creditor are creditor, lender and creditor.
Usually linked to the regular business account, it is an easy way to borrow money short-term. A fixed annual fee is paid on the amount of credit granted, which means that you pay even if the credit is not used. The amount of credit granted is the maximum amount that the company can have as a deficit on the account.
Crowdfunding is a form of financing that has grown rapidly in recent years, made possible by technology and the possibility of secure payments. Translated straightforwardly, it means crowdfunding or mass financing. Typically, a company tries to finance its business by selling shares or borrowing money from the public. It presents its company on a suitable platform (e.g. Pepins for new issues or Toborrow for borrowing money). Then it is open to individuals to invest their money.
The idea is that the cost to companies will be lower and the return to investors higher than what the bank can offer. It is important that you as an investor can analyse the risk and opportunities before making your decision. The problem for companies is that many investors prefer cool companies with cool ideas, to companies with ordinary ideas. Therefore, it is important that you can present your company in an attractive way and market yourself on social media, for example.
Read more about crowdfunding.
A service that can be offered by finance companies or banks. It involves a company selling or lending invoices.
An obligation or legally binding claim of an individually determined person against another person. Read more in what is what is a claim?
The debtor is the person who has borrowed money / owes money. Other words for debtor are borrower and debtor.
It is easy to confuse the creditor with the guarantor, who is the person who guarantees another person's loan.
You should not confuse a debt collection order from a debt collection agency with a debt collection order from the Enforcement Authority. It is common for creditor 1 to hand over his claim 2 to a debt collection agency instead of collecting the money himself. The debt has thus been transferred to the debt collection agency, which in turn sends the collection order to debtor 3.
1 The creditor is the person who has lent money / has a claim. Other words for creditor are creditor, lender and creditor.
2 An obligation or legally binding claim of an individually determined person against another person. Read more in What is a claim?
3 The debtor is the person who has borrowed money / owes money. Other words for debtor are borrower and debtor. It is easy to confuse a creditor with a guarantor, who is the person who guarantees another person's loan.
Means that virtually all assets are disposed of and used to pay off debts. Both debtor 1 and creditors 2 can file for bankruptcy.
1 The debtor is the person who has borrowed money / owes money. Other words for debtor are borrower and debtor. It is easy to confuse a creditor with a guarantor, who is the person who guarantees another person's loan.
2 The person who has lent money / has a debt is a creditor. Other words for creditor are creditor, lender and creditor.
Like a payment note, it is a listing with a credit reference agency that provides information on whether a person or company is considered unreliable as a payer.
It is the ability of a person or company to pay its debts. A low credit rating means that there is a high risk that the person or company will default on their loans.
The risk created by the customer's inability to pay. If you negotiate a loan with an interest rate, which Qred AB does not have, a high credit risk means a higher interest rate.
A basis for a bank, for example, to assess whether to give you or your company credit. There are credit reference agencies that provide this type of service, such as UC.
The Enforcement Authority
Central Swedish and state administrative authority whose tasks include ensuring that unpaid debts are paid.
When we talk about a company's liquidity, we often mean the company's cash liquidity. It is a measure of a company's short-term ability to pay.
Often abbreviated as P2P, it is a form of lending where the lender lends money directly to the borrower.
Personal guarantee and guarantor
A guarantor can most easily be described as a person who provides a guarantee for someone else. For example, if you are a guarantor for a business loan, you guarantee that you will pay the loan if the company defaults. Other words for guarantor are surety or pledgee. There are different types of guarantees. An unlimited guarantee applies to the whole of the company's commitment, which is common for slightly smaller loans up to around one million. For larger loans, there is often a limited guarantee, known as a maintenance guarantee, for a certain amount.
There may also be several guarantors, who either have a joint and several guarantee, i.e. they all guarantee the debt together, or individual guarantees where each guarantor guarantees a certain part of the debt.
Business loan interest rate
The interest rate for business loans is the cost of borrowing money and the lender's return on lending. There are fixed and variable interest rates, just like for other loans. At Qred AB, we do not charge interest. We have a fixed monthly fee. Read more about interest in What is interest??
Interest coverage ratio
It is a measure of financial control that indicates the ability of a company to cover its financial costs. If the interest coverage ratio is less than 1.0, it means that the company's income is not sufficient to cover its financial costs.
For example, if you have unpaid invoices or debts to the Enforcement Agency, a so-called debt balance is created. This is a compilation of the debts you have not paid. If you do not pay a debt, this can lead to a payment notice from the Enforcement Authority, which is then registered with the credit reference agencies. Read more in What is debt?
A financial ratio indicating the percentage of assets financed by equity. The assets that are not financed by equity are financed by loans, also known as borrowed capital.
Means that a creditor 1, i.e. the person who has a claim, requests the Enforcement Authority to seize immovable or movable property from debtor 2.
1 The person who has lent money / has a claim is a creditor. Other words for creditor are creditor, lender and creditor.
2 The debtor is the person who has borrowed money / owes money. Other words for debtor are borrower and debtor. It is easy to confuse creditor with guarantor, which is the person who guarantees another person's loan.