Loan with state guarantee: Choosing the right route

The article was written in collaboration with the Financial Solutions Group

Recently, the macroeconomic forecast of the research division of the Bank of Israel was published, which is characterized by a high level of uncertainty. According to the forecast, the GDP in the economy is expected to grow by 1.5% in 2024 and 4.2% in 2025, this forecast is lower than the previous forecast and the reasons for this are clear: the continuation of the war, the high interest rate and the ongoing inflation indicate a broad damage to the economy and a slow rate of recovery.

This forecast raises the likelihood that in the near future we will see more and more entrepreneurs and business owners turn to loan channels in an attempt to face the economic challenges and preserve their business vision. The pressing economic situation and financial difficulties pose significant challenges to many entrepreneurs, but also an opportunity to examine new financing options and continue to develop their business despite the difficult reality.

Most of them will surely turn to the front of the state-guaranteed loan fund intended for small and medium-sized businesses, and which provides financing on relatively favorable terms. At the same time, it is important to understand if this loan is the most suitable solution for your business.

An expert from the Finance Solutions Group presents us with three main routes, and presents examples so that any entrepreneur or existing business owner can think and see if this is the right route for them in the current period of time.

Working capital route: a solution to the cash flow crisis

"The working capital route of state-guaranteed loans is one of the critical and central routes offered to large, small and medium-sized businesses. This route provides a solution to a situation where the business is required to pay money to suppliers, pay salaries, pay rent or other related expenses such as bookkeeping, insurance and more.

A central problem that still characterizes the economic conduct of many businesses in Israel is the granting of payment terms of "current plus 60" or "current plus 90". This method is outdated and usually leads to the creation of a gap and lack of cash flow since the funds from the customers arrive late.  

For example, suppose a manufacturing business owner has to pay his suppliers and employees at the end of each month, but his customers only pay him 60 or 90 days later, even though his income is based on solid profits, this money is not immediately available for the day-to-day operations of the business. In such a situation, the business owner may turn to the bank and ask for a temporary loan until the money arrives from the customers, but many times the bank refuses to grant a loan precisely because of this behavior and procrastination.

This is where a state-guaranteed working capital loan comes into play. The state examines the business in depth, learns about its suppliers and customers, and understands the safe potential of receiving the money in the future. If the business meets the required conditions, the state provides a guarantee that allows the business owner to receive the necessary loan from the bank. This loan allows the business to bridge the cash flow gap, pay current expenses on time, and continue to operate smoothly until payment is received from the various customers.

Another important point, since in some cases a state-guaranteed loan includes a grace period of several months, this period of time can allow the business owner to change the pattern in which he collects the funds from customers. So that next time he will not reach a situation of lack of cash flow, especially if it is a healthy and profitable business, and that he will not need another loan to bridge the unnecessary gap."

Business investment path: the path to expansion and success

"This track is designed to help businesses grow and expand. It allows the business to receive financing for significant investments such as purchasing new equipment, opening additional branches, upgrading existing infrastructure or any other investment that contributes to the development of the business.

For example, let's say you have a successful restaurant in your city and you want to open another branch in another city. The cost of setting up the new branch includes rent, interior design, equipment purchase and initial inventory. A state-guaranteed loan can provide the funding required to establish the new branch, and allow you to expand your business activity in a controlled and safe manner.

Another example is a small factory owner who wants to upgrade his production lines by purchasing new and sophisticated machines. The investment in these machines will streamline the production process, improve the quality of the products and allow the factory to deal with the growing market demands. With the help of a state-guaranteed investment loan, the plant can obtain the necessary financing to purchase the equipment, thereby expanding production capacity and increasing profitability.

The state, for its part, encourages the provision of loans intended for successful businesses that wish to expand or purchase equipment, etc., with the understanding that these investments contribute directly to the growth of the entire economy, since this step leads to the creation of new jobs, to increasing the national product, etc.

Loan track for starting a new business: the solution to the entrepreneurial dream

"This route is one of the most important routes, because it addresses a sector of employees, most of whom have worked in a permanent job over the years, but in the secret of their hearts they have always dreamed of opening an independent business. Most of the time, this thought remains only a dream because they do not have the necessary amount to open a business their own, and they do not believe that there will be any major financial entity that will agree to give them the blessing and the amount needed to make the first parade. Therefore, a loan route to start a new business with a state guarantee is critical to their success.

For example, let's say that a 40-year-old employee, who has worked for many years in the high-tech field, dreams of opening a small cafe in the shopping center in her residential neighborhood. The cost of setting up the cafe can reach hundreds of thousands of shekels. With the help of a state-guaranteed loan to start a new business, she can get the necessary financing, despite her lack of experience in the field, because the state encourages such initiatives and presents guarantees to the banks so that they agree to grant the financing in question."

Finance Solutions Group helps businesses grow and prosper

If you are a startup entrepreneur or an existing business owner looking for ways to expand and grow, a state-guaranteed loan may be the solution you are looking for. The state offers different routes adapted to the different needs of businesses, so all you have to do is check the options available to you.

It is recommended to consult experts in the field of state guaranteed loans, and this is exactly what the Finance Solutions Group does. It helps to navigate between the various options of state-guaranteed loans so that it is possible to choose the most suitable route for the unique needs, and helps to obtain the necessary financing to realize the business vision.

 In collaboration with the Financial Solutions Group

To contact us for a state guaranteed loan, call: 077-740-8101