Business Loans in Austria, All You Need To Know

We explain in detail all you need to know about funding your business from the best types of credits available, the requirements, to having your credit approved to how to land the most attractive option viz-a-viz your preferences.

What economic measures has the government implemented for companies through covid-19?

The coronavirus pandemic had threatened to take a toll on Austria’s economy, just like in every other country. While companies, industries, and every part of the economy had started feeling the bite of the pandemic, the Austrian Government came in with measures that would help cushion the businesses and at least sustain the economy.

• Sectorial Sustainability and Cushioning

The government stepped in to cushion sectors that were directly affected by the pandemic like tourism, transport, and the hotel industry. Hotels that saw more than 15% loss in sales would receive 500,000 EUR in loans. 

• SME Loans and Guarantees

SMEs would receive 2.5 million EUR in loans, repayable after 5 years. The Austria Wirtschaftservice (AWS) would place a once and for all fee of 0.25% of the funds and 0.3% of the funds in guarantee fees.

• Crisis Management Measures

The Government also announced EUR 38 billion that would be used as crisis management funds. The government also gave out a clear breakdown of the funds where:

• 2 billion EUR would act as subsidies to the hard-hit entrepreneurs, where the funds would help them with their personal living costs.
• 2 billion EUR would help revive companies that were swept off by the pandemic.
• 15 billion EUR would be channeled towards sustaining the solvency of companies in the wake of Covid-19. 
• 10 billion EUR would be channeled towards tax deferral
• 9 billion EUR would be spent in granting guarantees and warranties

Other Grants would be channeled towards:

• Venture Capital 
• Business Start-ups
• Fund repayment deferrals
• Non-profit organizations
• Location security 

Additionally, the Austrian government provided bonuses for new investments where the investment was affected by Covid-19 and other factors such as climate.

Distinguishing types of company profiles

Getting finance for your company or business depends on a few factors including your business profile. The characteristics of your business profile are a great determinant of the type of financing you get and the processes involved. There are different types of business profiles:

Companies

• Entrepreneurs: this type of company has yet to materialize. Instead, it’s only imagined, probably planned for, and awaiting financing to materialize. 

• Start-ups: this type of business may not always qualify for funding as there are many parameters attached to business loans that might hinder that. Start-ups are physical businesses that are yet to gain ground. They may still have sustainability problems.

• Consolidated companies: these companies will easily get business loans because they have a stable system of operation, stable income, and have been running for some time. This gives lenders some sort of confidence in financing them.

• Large companies: their level of operation is either national or international. The financing needs are also huge, mostly in millions of Euros if not billions. For instance Erste Group Bank, UniCredit Bank, The Oesterreichische Nationalbank (OeNB), among others. 

Self-employed

• As legal entities: these are owned by professionals who work independently and may require some financing for their companies. Their entities may either be classified as start-ups or consolidated companies depending on their level of operation. However, the loans their business receives will be characterized as that of a single person.

• As natural persons: this group of professionals receive personal loans to fund their projects, say buying a car, a home, among other purchases. They draw their income from other sources besides employment.

Characteristics of business loans 

As aforementioned, your business profile will determine the type of financing your business qualifies for. Despite the uniqueness of the loan option you settle for, below are some of the characteristics to look out for as they cut across every loan option.

1. Cost: According to a recent survey, the average bank lending rate in Austria as of December 2021 was 1.570% which lowered from 1.620% in November 2021.

1. Loan amount: There’s no standard amount of loan set because the amount you get is dependent on factors such as your profile, savings, and other parameters that the entity will set. 

1. Purpose: You might want to expand your business, make purchases, consolidate other business loans, clear arrears with your distributor, finalize major projects among other reasons. 

1. Linkage: Your lender may want all the loanees to have a business account with them, savings account, insurance, or any other related products for you to qualify for a loan.

1. Term: Just like the loan amount, the payment period is determined by the agreement and the contractual terms. Big loans tend to have longer repayment periods, running up to 10 years while small loan amounts may have a 3-months repayment term.

1. Grace period: This is a period when you can stay without paying back the loan without attracting any penalties. 

1. Guarantee: Most lenders will require some form of security for the loans they offer. Hence, the lender will require “payment insurance” especially if the loan amount is big.

1. Concession: You might be in need of urgent money, hence, knowing beforehand how fast the funds will be released will help you decide on whether to take the loan or not. Some lenders may deliver the cash in a matter of days while others may take months.

1. Repayment: Your lender may require you to make payments in monthly installments while in other cases, you may have the option of repaying the whole loan amount plus the interest and commissions accrued at the end of the term.

Where to get business loans

As Austria ranks among the top countries in the Euro Area that have developed financial systems as well as soundness in banks, there has been a massive emergence of banks and entities that provide business loans and other financial products at very friendly rates. The average lending rate in Austria was below 4% in December 2021, which is something to go by.

• Banks: There are more than 650 banks in Austria that provide different products in their own unique standards. To qualify for a business loan, your business will require a high level of solvency as most banks opt to finance consolidated companies.

• Companies and private capital lenders: Getting funds from entities under this category just got easier and more convenient as the loan processing happens online. Meaning, they ensure fast concessions. Additionally, their financial products and offers are often lower in cost than those of banks.

• Alternative financing platforms for crowdlending: these are online platforms where companies connect us with private investors. Once we request a business loan, it’s upon these investors to decide on whether to contribute capital to your business or not. We’ll be required to repay the investors in the form of interest. The whole process is done through the internet and it might take two days to receive feedback.

Business loan conditions

Different entities will have different requirements for business loans. 

Below are some of the common requirements:

• National registration: some entities will need to draw confidence from the registration of your business, including whether you meet all the legal requirements (according to the Austrian law) for running a business in Austria, either as an expat or a native.

• Annual income: Austrian law requires businesses to keep account records, annual financial statements, and annual reports. Your lender might need this information to tell the solvency of your business and eventually decide on whether to fund you with the amount you’re signing up for.

• The seniority of the company: many lenders will not easily finance a business that’s been running for less than 12 months. Nonetheless, you might find alternative financing options if you’re just starting up a business or it’s a few months old.

• Credit history: before a lender approves a loan application, they will check with the different credit bureaus in Austria (KSV or SCHUFA) to establish whether your name or business has a poor credit history.

You might meet less or more stringent conditions depending on the entity from which you seek funds.

Documents needed to get funding

• VAT return from the previous year and the current year.
• Income tax return.
• Bank statement (if in another bank).
• Updated balance sheet of the company’s turnover.
• Proof of payment of Corporate Tax.

You might be required to send the documents online, via mail, courier, or deliver them in person. Some entities might require more or less documentation.

Other forms of financing for companies

• Business credit lines

With business lines of credit, the borrower can tap the money whenever needed until they reach their borrowing limit. The borrower will only repay the amount they have withdrawn and the interest attached and not the whole amount of loan that’s granted. Many Austrian lenders offer this product.

1. Factoring

This is a type of financing for SMEs where the lender pays for our invoices to one or more suppliers. We’re then left to clear the bill with the supplier either in full (the interest included), in part, or in installments.

• P2B or crowdlending loans

Through an online platform, a private lender may decide to invest in our business or for a reason, refuse to invest. You’ll see different services as you compare one platform with another in terms of the loan amount and terms and conditions.

• Loans with mortgage guarantee

With these types of loans, we’re only funded if we are able to present property (mortgage) to be used as a guarantee. The concession of these loans takes longer because of the appraisal processes involved.

Products to invest in your company

1. Equity crowdfunding

This is a platform where an investor is linked to a borrower. The private investor invests in our business until it’s stable. It’s important to note that once the investor finances your business, they’ll get a share of your business and share in profits.

1. Business Angels

Business angels are similar to equity crowdfunding only in that a group of investors come together and select a business in which they want to invest. Just like in crowdfunding, the investors will get a share of your company. 

• 3F (Family, Friends, Fools)

The conditions of getting financing from each of these parties are dependent on the agreement between you and the lender.

Aid for the financing of companies

 

• Capitalization of unemployment

You’ll best benefit from this option if you’re self-employed and want to start a business. 

• Subsidies

The Covid-19 pandemic brought about a surge in federal subsidies in Austria. Check out the Austria Wirstchaftsservice website portal to learn how to get a subsidy.

• Crowdfunding

Through these online platforms, you may get a private investor who’s interested in sponsoring your business or project.

About this page, our methodology

What is this page for: we present all you need to know about the best loan for your business that’s currently available in the market, which entities and platforms can solve our business financial needs, and what to do to obtain liquidity without overpaying.

Source: information about business loans interest rates has been drawn from Statista, while information about conditions of business registration has been sourced from the Austrian Law.

Methodology: all the information about the financing products has been collected through online research and mystery shopping.

About FUNDGECKO: we’re a team of professionals who are committed to helping you have an easy financial decision process, where you get a chance to compare the best financial products in the market and select the one that best suits your needs.

Note: All our services are free of charge as FUNDGECKO obtains its income from advertising and its featured products.