What is a Small Business Loan?
A small business loan is an unsecured sum which is borrowed in order to support a business or provide it with a financial boost. This could be to refurbish the property, start a new project or expand. These type of loans normally allow you to borrow £1000 – £25,000.
They can be at a fixed rate or variable rate of interest and will normally be paid over a period of 1-10 years.
Business Loans, like personal loans, are not secured against any assets.
It’s important to find a loan to suit your needs. Use our online business loan comparison service to assess a range of funding options.
Advantages of a Small Business Loan
- Convenience – There are multiple loan options to choose from and many providers offering more products. Business loans can be flexible and banks are always accessible. Many banks offer personalised service and advice which can be a huge advantage.
- Non profit sharing– as oppose to an investor who may want a share of the profits or a stake in the company, a bank will simply want the loan repaid with interest.
- Lower rates of interest – Compared to credit cards or other lending agencies, banks can have a lower rate of interest. Make sure you compare the market and do as much research as possible to get the right deal for you.
- Packages – Some banks offer business packages to go along with your loan. This could be an interest free credit card or overdraft or a bank account specifically designed for a business. The loan itself will be tailored to be used for a small business.
Disadvantages of a Small Business Loan
- Application Process– this can be time consuming, lengthy and you’re not guaranteed to receive the loan at the end of it. As the banks need to verify the details of your business and what you plan to use the money for, you could be waiting long than planned.
- Not guaranteed – you may not get the full amount that you’ve requested meaning you could be short of what you need to carry out the necessary work.
- Preference – Established businesses are given preference over new businesses. This is due to the banks being able to check the credit history.
How to apply for a Small Business Loan
After comparing the market and finding the right business loan for your needs, the next thing to do is apply. You can normally do this online.
By having the necessary information available when you apply for a loan. This can help speed up the process and boost your chances for success. This information includes:
- What are you going to use the loan for?
- How much would you like to borrow?
- Over what period do you want to repay the loan?
- What type of business is it, and who are the owners/directors?
- The provider will then take your credit rating into account and give you a decision shortly.