Differences between Loans and credits for SME

SME credits and Loans are two of the products most requested by medium and small companies.

A large number of users use both terms synonymously, but the truth is that it is not the same product, since there are several characteristics that differentiate them. Therefore, this time we reveal what exactly they consist of, in what aspects they differ and when it is more appropriate to request one or the other.

What is an SME Loan

When we talk about SME loans we refer to an operation in which there is an entity that acts as a lender and a company that requests an amount of money.

The applicant company must return said amount together with the interest in a specified period of time. To formalize the operation, a signature is made in which the number of periodic installments is agreed.

What is an SME Loan

An SME loan consists of a financial type operation in which an entity makes a maximum amount of money available to the company. The applicant company can access this amount for a specific period of time.

The main advantage of this operation is that it offers great flexibility, since you can have the money in the period you really need it.

Currently, with the advancement of technology, you have the possibility of requesting a credit online to simplify the process and operate more quickly.

What are the characteristics that differentiate them

The purpose of both products is the same: to solve financing problems to provide the company with greater availability of liquidity. In this way, you will have the possibility to improve certain aspects and make important investments.

The main characteristics that differentiate credit and SME loans are the following:

• The loan is usually requested for the acquisition of a specific asset. For example, when a company needs to buy machinery or make the purchase of a new premises.
• Companies apply for SME loans to solve some unexpected situations that they cannot cope with.
• The loan has a time limit, that is, there is a specific beginning and end of the operation. In case more money is needed, it will be necessary to apply for a new loan. On the contrary, with the credit the maximum period of disposition can be renewed automatically.
• Finally, through the loan the company has all the money immediately. If you apply for a credit, you do not have to use the entire amount of money you have available.

When to apply for a credit or SME loan?

Depending on the situation in which you find yourself, it will be convenient to request one operation or another.

In general, as we have mentioned, loans for companies are usually requested to cover daily needs and expenses. For example: to advance wages to workers, pay suppliers or catch up with payment to customers.

The loans are intended for major investments within the business. A large number of new entrepreneurs request this operation to buy a premises, carry out a reform, acquire machinery, etc.

We hope that you have no doubts about what is a credit and SME loan and what are their differences. If you are thinking of requesting any of these products, remember to previously analyze your situation to detect what your company's needs are. In this way, you will choose the best option.