Business loan in Czechia: what documents banks require

A business loan can help bridge cash-flow swings, finance growth or an investment. But a bank will lend only when the submitted documents convince it the company can repay the loan. The whole assessment therefore rests on documents — the clearer and more stable the figures, the better the terms the company gets.

It pays to know in advance what the bank requires and what it assesses, so you prepare the documents all at once and without needless delays. Let's go through it from the documents, through the assessment, to the cost of the loan.

What documents the bank requires

The scope varies with the loan amount, but the core tends to be the same:

• tax returns and financial statements for the last one to two periods,
• statements from the business account for the recent months,
• documents about the company — an extract from the commercial register, IČO and tax number (DIČ),
• an overview of obligations, receivables and existing loans,
• proof of no arrears towards the tax office and the insurers,
• identity documents of the managing directors and the purpose you are applying for the loan for.

Proof of no arrears shows the company has no outstanding debts to the state; issuing it takes a few days, so request it in advance.

What the bank assesses and how approval works

From the documents the bank assesses the company's creditworthiness — its ability to repay the loan. It watches the level and stability of revenues, profitability, the cash flow on the account statements, the degree of indebtedness and payment discipline, and it checks the company in the credit registers (the bank and non-bank client information registers), where it sees existing loans and repayment history.

If the assessment is positive, the bank presents an offer with an interest rate, maturity and any collateral, and after signing the contract it releases drawdown. The whole process takes from a few days for smaller loans to several weeks for larger investment loans. The more complete and transparent the documents, the faster the assessment.

A new company, types of loan and collateral

A new company without tax returns and financial statements has it harder, because the bank has nothing on which to assess creditworthiness. The solution tends to be a business plan with realistic projections, collateral or a guarantee from the managing director or a third party; some banks have products for start-ups with a lower limit.

According to the purpose the company chooses the type of loan: an operating loan for day-to-day running and bridging swings, an investment loan for buying assets or development, an overdraft (an authorised overrun of the account) for short-term needs, or a business credit card. Larger loans the bank usually secures — by a lien on real estate, a guarantee or a bill of exchange; smaller operating loans and overdrafts tend to be unsecured but at a higher rate.

How to improve your chances of approval

The chance of a loan and better terms is raised by clear and up-to-date accounting, a stable turnover on the business account, low indebtedness and a clearly documented purpose for the loan. It helps to have all documents ready at once and to be free of arrears towards the state already at the time of the application. Consistent, representative documents speed up the assessment and improve your bargaining position on the interest rate and on the extent of collateral required.

Costs and companies with a foreign owner

The cost of a loan is not made up of interest alone. There may be a processing and provision fee, a fee for keeping the loan account, and possibly loan insurance or an early-repayment fee. Before signing, therefore, compare all the fees and terms, not just the interest rate itself.

For companies with a foreign owner the bank carries out extended checks under anti-money-laundering rules and may require documents on the origin of funds and the ownership structure, so approval may take longer. It is advisable to check the availability of banking services already when preparing before setting up the company.

Conclusion

The bank decides on the basis of figures and history — the key ones are tax returns, financial statements, account statements and no arrears towards the state. A new company substitutes the missing history with a plan and collateral. Those who have the documents in order and ready in advance obtain a loan faster and on better terms.

Frequently asked questions

What documents does a bank want for a business loan?

In particular tax returns and financial statements for the recent periods, statements from the business account, an extract from the commercial register, an overview of obligations and existing loans, and proof of no arrears towards the tax office and the insurers.

Can a new company get a business loan?

It is harder, because the history the bank would assess creditworthiness from is missing. A business plan with realistic projections, collateral or a guarantee helps; some banks have products for start-ups with a lower limit and stricter terms.

What does the bank assess in a company?

Creditworthiness — the ability to repay. It watches the level and stability of revenues, profitability, cash flow, the degree of indebtedness and payment discipline, and it checks the company in the bank and non-bank client information registers.