Loans, Leasing and Collateral for Starting a Business in Georgia

Before applying for a loan, determine the specific financing purpose, such as investments, inventory or temporarily tied-up working capital. Lenders may require a business plan, revenue and cost projections, proof of personal funds, bank statements, tax data, contracts and evidence relating to the asset being financed. For a new business without a track record, personal creditworthiness, own capital, collateral and reliable evidence of customers often become more important. Compare offers based on their total effective cost, not just the advertised interest rate. Processing fees, insurance, valuation and registration costs, account maintenance, early repayment terms and possible penalties can increase the burden. A repayment schedule should show the disbursement, any grace period, installment amounts, due dates and outstanding balance in full. A loan in a foreign currency with income in GEL also creates exchange-rate risk, which should be modeled in an adverse scenario. Collateral may include land, buildings, vehicles, equipment, receivables or other realizable assets; check the valuation, priority and consequences of enforcement before pledging it. Personal guarantees can extend the financial liability of founders or shareholders beyond the chosen legal form. Leasing may be suitable for vehicles or equipment when the aim is to finance their use and the provider remains the owner during the term. Compare the down payment, regular installments, insurance, maintenance, restrictions on use, early termination and any possible residual purchase price. Microfinance can cover smaller financing needs, but should also be assessed based on total cost, collateral and repayment frequency. Include monthly debt service in an adverse, expected and favorable liquidity scenario. Financing is only affordable if sufficient reserves remain for revenue fluctuations after operating costs, taxes and repayments.