Credit purpose

The purpose of the credit determines what the loan can use the loan for.

The terms and conditions of the credit schemes determine the purposes for which the loan or loan taken out within the framework of the given scheme can be used to finance. The bank may request that the recipient of the loan prove in the manner prescribed in the contract that the money was actually used for the specified purpose.

Before taking out a business loan, it is advisable to clarify what purpose the money would be needed to achieve. The need for a loan arose due to the need for money to for financing daily operations or some growth goal (investment, company acquisition, etc.).

The purpose of the credit can often be inferred from the name of the loan. The current assets financing loan is used to financing the company's operating expenses. For example, the purchase of inventories or labour costs. An overdraft is the right solution to ensure the company's daily liquidity. An Investment loan can be used to finance the purchase of machinery, equipment, tangible assets, the purchase of real estate, the expansion and development of existing business property or leased infrastructure. A specific the purpose of the credit can be the financing of an acquisition or the redemption of a loan. The latter means replacing an existing loan.

After choosing the right type of loan, it is worthwhile to further study the regulations for the use of the credit schemes in question. A characteristic feature of loans offered with preferential terms is that in such cases, the activities eligible for funding within the framework of the given scheme are defined in more detail. They therefore regulate more precisely how and what the loan can be used for. The reason for this is that these loans are usually associated with an subsidised interest, the use of which is subject to strict conditions.