What is a business loan?
Business loans are a form of commercial finance product that are usually issued on an unsecured basis. They have traditionally been issued by the business’ own bank. But, there are now numerous specialist lenders, who offer faster and more flexible finance.
The team at ABC Finance Ltd are on hand to find the lowest rates for your company. We are passionate about supporting SMEs in the UK and want to save you time and money. Our service is totally impartial, and we recommend the most suitable products for you.
How do business loans work?
Almost all businesses need a financial boost at some time, whether they are looking to purchase new equipment or pay an urgent bill. Unsecured business loans can free up the cash needed to help you to expand and take your company to the next level. With so many new lenders coming to the market, undertaking a comparison isn’t as easy as it once was.
On top of the offerings through the major banks, there is heavy competition from peer to peer lenders. This level of competition is obviously great for you, the business owner, as it drives the cost of loans down. Due to the rising number of lenders in the market, however, making sure you secure the lowest business loan rates can be time-consuming.
Unsecured lenders all have their own ways of assessing applications and have been known to judge the same application differently. Each lender tends to have their own niche, with some focusing on fast loans. Others could take longer to assess an application but will offer a low-interest rate once the application is accepted. The difference between interest rates and monthly repayments between different lenders can be vast. Therefore, a thorough check of the market is needed to secure the lowest rates.
The pros and cons of business loans
Taking out this type of loan can drive an SME to the next level. But there are a number of pros and cons to consider before taking the plunge.
- Fast and Flexible: Times have changed, and the major banks are no longer the go-to option. Most specialist lenders have online portals that let you know your chances of being accepted upfront, and loans usually complete in or around five days.
- Funding Is Becoming More Widely Available: Loans are much easier to come by than they once were. Across the alternative finance market, there are more products than ever. There is a good chance that one of those options will give your business the funds it needs.
- Low Interest Rates: Business loan interest rates from specialist lenders are far lower than they have been historically, with rates starting from as low as 8.9%.
- A Cash Injection Can Provide A Big Boost To A Business: Business loan interest rates from specialist lenders are far lower than they have been historically, with rates starting from as low as 3%.
- Funding Is Harder To Come By For Start-ups: : For established businesses, funding is becoming more widely available. But for start-ups, the application can be time-consuming and difficult. Funding is available but be prepared to provide a lot of information in order to be successful.
- Personal Guarantees: The lender will usually require a personal guarantee, which means that you will personally be liable if the business defaults. Although personal guarantees can be insured, there is a cost associated with this.
Business loan lenders
As the market continues to grow, so do the number of lenders in the market. The main ones in the market are:
- High Street Banks
- Highly Specialist Independent Commercial Lenders
- Challenger Banks
Business loan lender assessments
There are a lot of lenders in the business loan market, and all of them will have their own methods of assessing the suitability of an applicant. In order to allow them to underwrite the application fully, they will usually request the following information:
- Details about yourself and the business
- Credit reference information (usually undertaken automatically on application)
- Two years’ accounts (where the business has been trading for two years or more)
- Three months’ business bank statements
The lender will use this information to underwrite the application. Their checks will primarily focus on the following:
- The affordability of the loan
- The likely impact of the loan on your business
- Previous credit history
- Any projected future changes in income that may affect the ability to maintain payments
These assessments are usually completed very quickly, with heavy automation reducing the timescales dramatically.
Applying for a business loan
Our experienced team make the whole process completely straightforward. From taking your initial enquiry to the drawdown of funds, your dedicated adviser will manage the application through to a speedy conclusion. Once the application is submitted, there can still be a lot of work to do and we offer continued support to ensure you have the best chance of success.
Our advisers take control of the situation after finding you the best possible terms. They then manage the application through to completion in the quickest possible time.
How much can I borrow?
They are available for any amount from £500 all the way up to £1,000,000 and even more for the right application. Due-diligence regarding affordability will be undertaken to ensure any borrowing isn’t a strain on your business.
To find out how much you could be eligible to borrow, talk to one of our expert advisers.