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, we don't charge interest. We have a fixed monthly fee.
So our loans do not have a separate interest charge. A fixed monthly fee is paid each month as the cost of the loan. No other fees are added. The fixed monthly fee is individual and is based on your Qred Score. The company's Qred Score is based on many parameters and we make an overall assessment of each application. The loan has no binding period, start-up fees or other hidden fees.
More on how the interest rate on business loans is determined
The pricing of business loans, i.e. the interest rate and fees the company has to pay, is set by lenders such as banks and financial companies.
There are hundreds of lenders on the Swedish market. To find the right lender for your business, you need to understand how they work. We have made an illustrative example:
The Dinosaurs - These are traditional lenders who essentially only care about one thing: What assets can be pledged as security for the loan that the lender can seize in the event that the company cannot repay the loan? For example, if your company wants to borrow SEK 500 thousand, you need to pledge, for example, a house worth at least 600 thousand. Pledging is done through mortgage deeds and business mortgages.
Being a dinosaur in the loan market is a successful strategy and has worked for thousands of years. The problem is that it completely fails to assess the viability of the company and its business idea, which excludes a large proportion of Swedish entrepreneurs from the loan market. Sadly, many Swedish banks still act like dinosaurs.
The calculators - There are many factors that come into play when assessing a company's likelihood of being able to repay its business loan. For example, statistically speaking, lending to new businesses is more risky than lending to old businesses; a business with a payment default is more risky than a business without one. And so on. Calculators have analyzed hundreds of factors and believe they can assess the risk of each company by analyzing hundreds of parameters. By automating the whole process, the manual cost can be reduced and even small loans become profitable.
Broadly speaking, the parameters can be divided into four different categories:
- Activities in number of years
- Seasonal variations
- Dependent on the economic cycle
- Customer dependency
Key financial indicators
- Profit margins
- Payment practices
- Defaulting on payments
- Debt balance or seizure
- History of representatives
Cash flow and liabilities
- Size of the debt
- Type of debt and loan
- Debt trend
- Debt to turnover ratio
The Realists - This is the new generation of lenders. Unlike banks, they do not have a large cost base of staff and bank branches, but can handle a large amount of small loans by using digital technology.
Unlike the dinosaurs, there is no emphasis on traditional collateral, but instead a qualified assessment of the business model and the person or persons behind the company. Modern lenders such as Qred always perform a manual final assessment where factors such as the entrepreneur's experience, drive and skills are taken into account in the overall assessment. As a result, the new realists are able to provide loans to businesses that wouldn't have been able to borrow from either the dinosaurs or the calculators, while keeping the rate of bad payers low.