Access business loans that cater to your unique business needs
Business financing can be intended to start a completely new venture, expand established business, invest in an already existing business, to fund innovation or to buy essential goods and equipment for the business. Several alternatives exist for those looking for business loans in the UK.
What is a business loan?
In the UK, business loans are divided into two broad categories; those for start-up ventures and those for existing businesses. There are plenty of lenders, some specialising in start-ups, others in an established business and some in both.
Some lenders provide loans to small-sized or medium-sized business and there is no defined boundary when it comes to them. Division of the loan in two categories is important as various lenders and different offers for you, and you must know what you want and where to look for it.
Getting loan approval in the UK
A clear distinction lies in the fact that in the UK, getting loan approval for a start-up venture is harder. This is because such a venture does not have enough credit score or a reputation, to begin with.
A huge risk is involved in lending money to a business where the guarantee of success is not provided. The repayment term of business loans may last from months to years, with the maximum repayment term of 10 years.
Interest rates are dependent on the lender and what they have to offer. Some lenders may have fixed interest rates that remain unchanged, but there are some lenders who offer flexible interest rates and have room for variation.
Getting a loan for a start-up venture
Risks are always involved when you begin something from scratch. Although this is dependent on varying factors. It leans off the nature of the industry you are entering, as some industries are more complicated to enter than others. It also depends on your experience, those with no experience would see ups and downs as their decision-making power is compromised.
For start-up businesses in the UK, the most difficult step is getting capital to finance the venture. This is tough as lenders are always hesitant to loan money to a business with no financial history or any form of security.
It's difficult to find a lender who suits your needs, and it's difficult to make your application appealing when you have little information to back it up. As the chance of rejection is high, it is best to apply to as many lenders as possible.
This increases the possibility of getting a loan approved, and this also saves you a lot of time. If you get accepted by several lenders, you would then have an option to chose a deal that is sustainable for your business and affordable for you.
It is possible that you might get a loan approved but with high-interest rates. Again, this ties up with the lack of security you provide to the lender. With no credit history to back you up, the only way the lender minimizes the chance of risk is via hefty interest rates.
Getting a loan for an established business in the UK
Business who are already steady on their feet finds it easier to get their loan approved. The obvious reasons for this are; long credit history and a financial report to support your loan application.
With a running business, profit is already being generated, and this means you are able to repay the loan in due time. An established business owner may also be in a position to hold a property or a vehicle as collateral or security.
However, several important things need to consider. First and foremost, you need to realise that a loan might put a financial constraint on the business. You must be 100% sure that getting a business loan is the only possible way for you to go forward.
You must be in good credit. This means that you have repaid all previous debts if applicable. You do not have any outstanding payments or overdrafts. You should not have missed payments or numerous debts in your reports.
Business owners should also make sure that all documents required for the application are submitted. You must follow the checklist provided by your lender to ensure that you have everything sorted and ready to send in.
Any errors or problems in the documents may lead to the lender rejecting you and putting a dent in your financial history, which may make it difficult to get a loan approved in the future. With online loan applications available, you are able to get the business financing you need in the shortest time possible.