Financing a company (based on the Polish case)

Sources of funding

Acquiring financing for development or starting a business is one of the key conditions for business success. In recent years, the requirements for obtaining financing have increased, as has the competition of companies to obtain long-term investments. The main sources of financing companies, beyond profit, are:

1. Debt financing – banks finance companies by granting: credit, leasing, factoring,

2. Grants – EU co-financing, various types of PARP programs

3. Equity financing – equity investments through financing from funds, from business angel, IPO’s on stock exchange.

In this article, we will only deal with debt financing through a bank loan for SME companies (small and medium-sized enterprises)


What is goal and what is the purpose of the loan?


The company should specify exactly what for they need money. Is it working capital, or purchase of fixed assets, real estate, purchase of technology, etc. On this basis, a bank loan will be adjusted later and its terms, including price, will be determined. For this purpose, it is best to describe what the loan is for? , how will it be used ?, at what time?, what is the own contribution?, what protection will we provide for the bank?, what are the benefits of spending the loan?, what sources will we refund the loan from and when?, what benefits we had achieved after returning the loan? In our calculations, we should take into account the price of the loan – interest rate and commission. If you have any doubts, please send an inquiry to Without specifying the above-mentioned conditions, we will not be able to cope because the bank will ask you about all those things sooner or later.


Bank’s requirements before granting a loan and documentation


Each bank has its credit granting instructions, but in most cases the requirements overlap to a large extent. So what are the banks’ requirements for companies that apply for a loan? Below we present a list of bank requirements:

1. The borrower need to be operating on the market for over 1 year. There are rare cases that require 6 months.

2. Summary of the borrower’s basic documents: statute, National Court Register, NIP, REGON, resolution appointing the management board, a resolution allowing for incurring liabilities – if required, a loan application

3. List of turnover on the bank account. If the company settles cash with contractors, this is a weak point. The higher the turnover, the greater the possibility of obtaining a larger amount of credit.

4. Annual financial report containing profit. The bank may request financial statements for the last 3 years. If the company has a loss, most banks refuse to grant a loan.

5. Statement of fixed assets. Not every bank requires this document. The higher the value of fixed assets, the higher the probability of obtaining a higher loan amount.

6. Collateral list. In the case of an overdraft revolving loan, it may not be required. On the example of one of the banks, overdraft loan is granted for 200% of account turnover in the month, however, no more than 20% of annual net sales. In the case of collateral in kind, banks usually ask for an appraisal report specifying the value of collateral.

7. List of overdue liabilities.

8. Certificates: about not paying taxes, ZUS, other statements of the company’s management board

9. List of company’s debt and pledges, including indebtedness to shareholders.

10. Consent for opening account and transfer turnover to the bank – lender

The bank will conduct a financial analysis of the company and calculate indicators, including liquidity, net assets, profitability, etc. If the company finances itself with contractors’ obligations, this is a weak point.


The bank’s offer and the procedure of granting a loan


In order to obtain the best offer, it is a good idea to prepare an offer inquiry specifying the terms of the loan. What should the offer inquiry describe in a separate article in the “Corporate Finance” series. After obtaining the proposals of banks, we compare them and choose at least two of the best. Why? Because in the course of preparation of the loan agreement, it will turn out that the bank with the best offer set the requirements that included the request for quotation.

If we have met the bank’s conditions, a loan agreement will be sent to the company. After signing the loan agreement, establishing collateral and fulfilling additional conditions, eg. opening a current account, submitting a company management declaration – the bank will grant a loan.




The above description is suitable for a working capital loan, a loan financing foreign trade. In the case of an investment loan, a project finance loan, bank will apply for more requirements. First of all, you will be asked for a business plan with full financial data, a financial projection for a minimum of 3 years and sensitivity analysis. Bank, among others will verify the analysis of cash flows, which determines whether you will have enough cash to repay the loan over the entire loan period. The bigger the share will be, the greater the chance of getting a loan.

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A word about interest rate risk. In most cases, banks provide variable rate loans. If the loan is for a few years, we recommend negotiating a fixed rate. The current level of interest rates is encouragingly low, below the 1-year WIBOR chart from the last 10 years.


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