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Compare Business Loans

Whether you are looking to start a new enterprise or grow an existing business, a loan can help you to secure the meaningful success you want to see. If you are currently considering your options and are looking to compare business loans, here are some things to note that will help you to make the right decision for your operation.

Are there different types of business loan?

Yes, and the type of loan you choose to apply for should always be driven by both your current financial position and the needs of your business.

Unsecured business loans

Unsecured loans are taken out without collateral and can be borrowed from a building society, peer-to-peer lender, specialist lender or a bank. As there is nothing to back the loan, the amount you will be permitted to borrow and the interest rate you will be offered will depend on how creditworthy both you and your business are deemed to be by your prospective lender.

Although it is possible to secure a business loan if you have a poor credit rating, you will be subject to additional checks and will likely only be offered loans with higher interest rates. You are also more likely to be approved for a secured loan than an unsecured loan.

Secured business loans

Depending on how much money you would like to borrow and what you intend to use the money for, you might have the option to secure your loan against a variety of different assets. Security is usually comprised of business assets, but you might also be permitted to use your home as security.

Secured loans typically allow a business to borrow more money than they would otherwise be able to with an unsecured loan. However, as your loan will be secured against an asset, it is important to carefully consider this option because failing to keep up with repayments could have significant consequences.

Am I eligible for a business loan?

Your eligibility to receive a business loan will be dependent on both your personal finances and the financial situation of your business. As with all types of borrowing, a loan provider or bank will analyse your credit history and will probably want to see your business accounts. If you are a new business and don’t yet have any accounts to provide, your prospective loan provider might request to see your business plan in order to make a final decision as to whether to approve your loan application.

It is therefore important to ensure that your finances are in order before submitting your loan application, which will help you to be as prepared as you can be to provide your prospective lender with all the information they need in a timely manner.

What are the advantages of a business loan?

Business loans offer financial flexibility and can give new businesses an element of security as you push for growth. Business loans are also an excellent alternative to securing investors for business owners who are keen to retain full control over their operation.

Some providers offer repayment holidays to businesses if they experience a cash-flow issue or are waiting on overdue payments from clients. This can ease short-term pressure on your business finances, but it is important to remember that interest will continue to accumulate and you will be required to make repayments for longer than the initial agreed term.

What are the disadvantages of a business loan?

Most mainstream lenders and banks will require you to provide frequent business performance updates and you must be willing to undertake regular financial checks.

If your business is in a strong financial position and you want to repay your loan in full before the end of your agreed term, you might be subject to an early repayment fee. It is important to carefully consider the length of your repayment term before committing to it.

How can I effectively compare business loans and find the best rates?

The length of time it will take to successfully secure a business loan can vary, although you might find the process is somewhat more efficient if you are approaching a provider you currently bank with. But although approaching your current banking provider might initially seem like the simplest option, shopping around and considering all options available to you will help you to secure the best possible deal.

As with all financial services, it is important to gather all important and relevant documents together to keep them organised and in one place. When conducting a business loans comparison, you will likely need business accounts, bank statements and forecasts to hand to ensure you are provided with the most accurate results.

Before comparing your business loan options, it is important to think carefully about:

  • How much money you want to borrow
  • How long you want your repayment term to last
  • The interest rate you will comfortably able to repay
  • The type of loan that is best suited to your business
What should I look for when conducting a business loans comparison?

When embarking on the business loans comparison process, ultimately, it is best to only borrow as much money as you need at the best possible interest rates as this will ensure you won’t need to pay back more than is absolutely necessary. There are also a few other things to keep in mind, including:

Fees and rates

Depending on the prospective lender and the types of business loans they offer, associated fees and rates will vary. Rates can also be impacted by the industry within which you operate, your credit history and your business activity. Additionally, while business loan interest rates are typically fixed, you might be eligible for a variable option. This means that your payments could increase or decrease at any point throughout the duration of your agreed term.

Eligibility checkers

Whilst you compare business loans, it is also a good idea to see whether your potential lenders will allow you to check your eligibility with them without impacting your credit rating.

Specific criteria

Some loans are only available to certain businesses or those that are able to meet a list of specific criteria. It is therefore important to read the small print of each potential offer to ensure your business qualifies.