Among the various financial products offered on the loan market, the financing called ” Bullet “, an English word that literally means “bullet” and refers to the return of capital in a single solution, therefore “in one fell swoop”, appeared.
The repayment methods of this type of bond or loan envisage an amortization plan with payment of interest only during the entire amortization period, while the capital initially paid is repaid in a single payment at maturity.
A bullet loan offers the investor a greater return as the principal of the loan is not progressively reduced over time, consequently, the interest is always calculated on the entire initial capital.
More and more credit institutes and financing companies offer their customers, due to the modality, this financing that allows them to customize the economic conditions and build a specific product on the customer’s needs.
On the other hand, it involves an outlay of a certain importance: in fact the structure of the bullet financing requires that the beneficiary only pays the interest installments, but at the end of the amortization plan, which is generally short or at most medium term, or even if expressly provided for in the contract, it must repay the entire amount granted as a loan, or renegotiate an extension of the loan itself.
The type of applicants for this type of financing, which is a type of loan or unsecured loan, therefore a loan not guaranteed by any real guarantee or surety, is evidently restricted only to particular categories of subjects, generally it is represented by companies and companies, but this also includes some professional categories, which see in the respective social security funds the lender, as a liquidation advance.
Regardless of the type of applicants, the repayment method remains unchanged, while the minimum financeable sums, interest rates, and related ancillary costs change considerably, as well as the required guarantees, there can be wide disparity of treatment depending on the type of financial institution you are dealing with, an aspect that is further complicated by the contractual force of the applicant with respect to the reference bank.
A fast loan with great impact
Already the word “bullet” makes us understand the speed and the considerable impact of this operation. The time span is relatively short for financing and with an outlay of money that can be quite considerable, depending on the situation.
Obviously much depends also on the motivations that push for the request of instant liquidity, as in the case of the social security funds that contemplate this credit possibility, and for which it is generally not very high maximum amounts: in this specific case we are much closer to a more typical example of a salary assignment that would not otherwise be available as a solution for the professional category concerned, such as for notaries, lawyers or accountants.
On the other hand, with regards to the duration of the loan, generally it goes over a short period established on average in 12 months, but there are also cases of longer depreciation, up to a maximum that does not exceed 8 years. Regarding the interest rate applied, you can choose either fixed or variable, although it often depends on the amount requested, and consequently opting for variable or stable installments for the entire duration of the repayment.
Many of the credit institutions offer their clients this type of loan, with the related conditions: for example, at the time of writing, Unicredit offers this type of loan, which is also accessible to companies in particular difficulties, for a maximum duration of 12 months, for example, those affected by natural disasters, or non-profit associations, with both fixed and variable rates, and negotiable economic conditions.
The Intesa San Paolo group also offers the Bullet formula but with a maximum duration of 18 months, both fixed and variable, giving preference to those who must support investments in an ecological key, to reduce environmental impact or improve energy efficiency.
We close with the offer of Mont Pochi de Siesa, which grants up to 300 thousand euros which can be financed both at a fixed rate and a variable rate, but with a maximum duration of just 4 months.
However this we are talking about is almost always a rather burdensome form, given that the capital remains intact until the end of the loan, so that the total interest repaid is always very high, unless you opt for a duration of extremely short reimbursement (as in the case of a loan sum requested to deal with a temporary illiquidity, but with very short-term programmed revenues).
It is therefore a loan, with a high possibility of customization and with the possibility of negotiations even during the repayment period, which can be used both for a temporary need and to support the company’s development or enlargement projects (including operations of purchase of real estate or capital goods of a certain value), or even to cover short-term credits and rebalance the cash flow.
On the other hand, this financing has the disadvantage of being very expensive, and in any case collateral forms of collateral, even substantial and of a personal nature, are always required, thus increasing the costs of the financing itself.