Compare the best options on the market and choose the one which best adapts to your day to day needs.
Further Below: Our Guide To Business Loans in Iran, Everything you need to know.
General loan provider in Iran
- According to world bank statistics, Iranian banks have not been approved to offer personal loans since 2005. The World Bank works with The Central bank of Iran to offer credits to all types of borrowers.
- Iranian banks are only allowed to transact with Islamic Transactions which are interest-free. Interest charges are considered as ‘Riba’ which is not allowed in the Islam laws and the holy book of the Quran. Private banks charge interest based on approval by the Central Bank to curb inflation effects.
- All loan disbursements are approved by the CBI which has sanctioned and is monitoring major lending entries in Iran. Similarly, Iran is currently under blacklist and it is quite impractical to receive loans from the banks of Iran.
- Iran’s current lending rate is 18% which is expected to remain consistent throughout the year due to the banking system challenges.
Business Loans in Iran, All You Need To Know:
We are committed to providing the reader with comprehensive information regarding business finance in Iran, including the many credit options, requirements for applying for grants and loans, and the necessary paperwork. Additionally, we streamline the loan application process by arming the user with all the insider tips for obtaining credit that best suits their unique circumstances.
[UPDATE] What economic measures has the Government implemented for companies through covid-19?
Like many other nations throughout the world, Iran began implementing measures and policies at the start of the epidemic to protect businesses from the virus’ severe ravages. The Iranian government allotted cash in March 2020 to repair the nation’s failing economy, focusing on various industries and demographics including employed people and independent contractors, among others.
- The government set jurisdictional tax measures which involved a reduction of the interest rate charged on deductions and deferment of payment deadlines.
- Tax payments on government services were waived for 3 months. This was about 7% of the total Gross Domestic Product.
- The measures allowed companies affected by the pandemic to temporarily defer the payment of social insurance contributions. The policy was upheld until 20 September 2020.
- Most affected households and businesses were offered subsidies of 4.4% loans taken before and during the pandemic.
- The government would provide loan guarantees to help salvage companies and SMEs by covering their current costs for about 3 months.
- Start-ups and other private entities affected by the pandemic were supported by the Central Bank of Iran to ensure they penetrate the foreseeable future.
- Self-employed entrepreneurs whose businesses were grounded by the lockdown received compensation or insurance benefits through the earning loss allowance scheme.
- The Central Bank in agreement with the ministry of finance approved a reduction in interest rates charged to consumers with existing loans during the pandemic.
- The government allocated 6 trillion to finance low-interest loans which were offered to businesses before the pandemic.
- The Confederation ran a guarantee program to ensure that SMEs feeling the heat of the pandemic can access transitional bank credits. The program made the process of accessing the credits easier and faster than in normal circumstances.
Distinguishing types of company profiles
Finance for your firm is determined by several factors. Your company’s profile, among other things, is a key element in determining the kind of finance you receive. Let’s explore the various types of business:
- Entrepreneurs: this alludes to a business idea that has not yet come to pass. When the entrepreneur receives funding, it comes to fruition. The business owner is simply making plans at the moment.
- Start-ups: This kind of enterprise already exists but hasn’t yet gained popularity. The company can still be losing money, and it might not be making a lot of money. At this point, the owner might need to obtain funding, which presents a challenge if the company is not sufficiently solvent. The majority of lenders will be reluctant to provide finance for a company that isn’t able to guarantee loan repayment. As a result, the owner of the firm might not be able to support it.
- Consolidated companies: This kind of company has been around for a while, generates a lot of revenue, and is financially sound enough to get approved for some good loans. When financing the company, the lenders rely on its financial stability. The company can survive.
- Large companies: these are businesses with a large scale of operation, either national or international. The financing needs are also huge, mostly in millions of Euros, dollars, or francs, if not billions. For instance the Central Bank of Iran, IMIDRO group, and Iran Khodro Company, among others.
Characteristics of business loans
The type of business loan mainly depends on our company’s credit profile and type of credit. Regardless of how unusual the credit is, the following are some of the most typical traits to watch out for:
- Cost: Two things may affect your loan cost: your business profile and the type of credit company. According to World Bank Statistics, the average lending rate in Iran as of 2022 October is 18%, which the country has maintained for a couple of months. The banking system in Iran is not currently stable as inflation rates are quite high and unpredictable.
- Loan size: This depends on your business’s particular needs, your marked-out business aims, and your prospects.
- Purpose: The loan purpose differs among applicants as it cuts across different aspects such as purchasing goods, settling debts with your suppliers, and making more investments such as buying new machinery, among others.
- Linkage: A business loan mostly comes as a package. Hence, you want to pay attention to its related products that may involve additional costs to acquire.
- Repayment terms: while your type of credit will determine how long your repayment term will be, most terms may last 2 months while others may take 5 years.
- Grace period: At this time, you can go without paying the loan without attracting any penalties. This is majorly given on huge loans.
- Guarantee: Your business profile and loan size will set different guarantee conditions. You may be required to present payment insurance with collateral especially if applying for a large loan size.
- Speed: How soon you get the money after your loan application is approved is also a great subject of consideration. Averagely, you may have to wait for 3-21 days to have the funds in your hands.
- Repayment: some entities will require you to make monthly installments while others will have you pay the whole lump sum plus interest at the end of the term. Hence, choose the one that best suits you.
While the Iranian government has established regulations governing consumer credit, non-bank lenders frequently have their own set of requirements for applicants. Therefore, it’s crucial to be certain of the contract’s terms before applying for a loan. Before taking out a loan, do your investigation into the credit company’s background and reputation.
Where to get business loans
As the thirst to break loose from the conventional way of providing loans intensified, many entities broke into the Iranian financial market. There are non-bank loan providers that have come up to compete with banks in terms of their loan conditions and products offered.
- Banks: They have a wide range of financial products, flexible repayment terms, and attractive interest rates. Therefore, a company requesting a loan must be a legal entity and have a high level of solvency.
- Companies and private capital lenders: The majority of lenders in this category allow borrowers to apply for loans online, which makes the process much simpler and quicker. Many individuals choose them since the application process is quick, can be done from anywhere, and the credit has fewer qualifying requirements than in banks. However, compared to bank business credits, the loan size is typically smaller.
- Alternative financing platforms for crowdlending: These platforms are businesses that will introduce us to individuals who will judge whether to provide working capital in response to our requests for business loans. These investors will benefit from our degree of risk in the form of interest that we will pay them. We will be able to get a response in 48 hours because the entire processing of these credits is done online.
Business loan conditions
The criteria for receiving funding will differ depending on the type of loan we seek as well as the organization with whom we choose to submit the credit application. However, there are a few prerequisites that all businesses must fulfill to qualify for loans:
- National registration: Iranian law states that a company can only operate legally after obtaining national registration. As a result, before financing your firm, lenders will check this as one of your credentials. You prevent traveling back and forth and make sure to fulfill all registration criteria before applying for a loan.
- Annual income: Your account records, annual financial statements, and annual resorts are a few items you’ll need to have before being approved for business credit. To determine your capacity to repay the loan, the lender will need this information.
- The seniority of the company: The time that your business has been running determines its stability and the type of loan it qualifies for. A business that’s been running for less than 12 months will receive fewer funds than one that’s been running for 5 years.
- Credit history: having a poor credit history will automatically disqualify your business from getting a business loan. The lender will check with different credit bureaus in Iran before approving your loan application.
Note: whether you meet all the requirements for financing or not, the lender is not obliged to give you the loan.
Documents needed to get funding
- VAT return from the previous year and the current year.
- Income tax return.
- Bank statement (if in another bank).
- An updated balance sheet of the company’s turnover.
- Proof of payment of Corporate Tax.
The lender may require you to deliver the aforementioned documents to their offices, transmit them through email, upload a photo, or utilize a courier. To find out if the entity needs any other documents in addition to those we’ve listed above, check with them directly.
Other forms of financing for companies
- Business credit lines
Unlike other forms of financing, business lines of credit allow borrowers to withdraw funds incrementally and repeatedly up to the borrowing limit. Additionally, rather than paying back the whole amount that the lender extends, the borrower is only expected to pay back the amount they have withdrawn plus interest. Many borrowers choose this kind of finance, especially when they require ongoing small-dollar funding.
Small and medium-sized businesses benefit most from this sort of financing because the borrower can use the money to pay all of his suppliers’ invoices. Depending on the agreed-upon loan terms, the borrower will be required to pay the lender the money utilized to pay the invoices plus any accrued interest.
- P2B or crowdlending loans
In Iran, business crowdlending takes place on an internet platform where the borrower receives funding from the public. Investors and borrowers are connected via the web platform. Depending on our agreement, the investors may decide to directly finance the company or fund particular projects.
- Loans with mortgage guarantee
In this category, the borrower will need to present property which will act as some form of guarantee. Without it, the borrower will not be financed. The application process takes generally longer because it involves appraisal processes. Hence, it may not be the best option when we need fast loans.
Products to invest in our company
- Equity Crowdfunding
Crowdfunding, as the definition indicates, entails obtaining capital for businesses that have been raised by numerous people or organizations. You can sell your investment instruments, such as company shares and others, using crowdfunding portals.
- Business Angels
Business Angels platforms connect borrowers to potential investors. Business Angel investors do not work with an individual business proprietor, Instead, the managers select where they will invest. Once they select your company, they’ll always be part of the management. You might miss the opportunity of being funded by Business Angels if you’re only working on a small project.
- 3F (Friends, Family, Fools)
The 3 F’s (Friends, Family & Fools) are a further source of funding for our company. Agreements between the parties will determine the amount and other terms.
Aid for the financing of companies
- Capitalization of unemployment
When a borrower wishes to launch a business but is self-employed, only this sort of financing is possible. If the borrower uses the money to start a new business, they will be eligible for full unemployment benefits.
2. Government Subsidies and Grants
The government offers a lot of assistance for starting or expanding businesses. To find out if your company qualifies for grants or subsidies, visit the website of the Iran Agency for Development and Cooperation.
About this page and our methodology
About this page: We are dedicated to assisting you in obtaining the greatest financial solution compatible with your financial circumstances. For you to receive the most appealing offer currently accessible, we combine the best information available about consumer loans and how to compare your possibilities before selecting an option.
Source: The information regarding the main characteristics of loans in Iran and their current regulation comes from the World Bank statistics and the Central Bank of Iran, among other reference portals.
Methodology: The data relating to the conditions of these products (amount, term, interest, etc.) have been obtained through online research and consultation of the official statistics of the aforementioned reference sources.
About Us: FUNDGECKO is a website that compares products online with a focus on personal finance and home economics. In addition to assisting customers in comparing the financial products on the market, we also give comprehensive information that will speed up decision-making and enable consumers to choose the best deal.
Note: the services we offer are totally free for the user, as FUNDGECKO obtains its income from advertising and its featured products.