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Compare SME Business Loans
How Can They Help Your Growing SME?
If you’re a small enterprise or a new start up, you may be finding it confusing to choose the right business finance for your needs. The good news is that securing a great business finance deal doesn’t have to be difficult. Here are 3 aspects that every SME should look for in a small business loan:
- Profit Growth Business profits can be improved through various strategies – most notably through a greater focus on marketing for brand awareness and visibility, through advanced office equipment and professional premises, and through raised prices that reflect an enhanced quality and service. A recent report by British innovation charity Nesta – and backed by research by the University of Cambridge – suggests up to 63 percent of commercial peer-to-peer borrowers in the UK have successfully increased profits as the direct result of suitable and affordable business loans.
- Increased TurnoverThe same Nesta report suggests that around 70 percent of businesses that receive funding through an equity crowdfunding scheme – one of the most popular types of alternative business loans – enjoy increased turnover. This can be reasonably attributed to an improved sales volume through greater sales training, streamlined internal processes, and an expanded capacity for businesses in the service industry. There are, of course, many advantages to an increased turnover, one of the most prominent being compulsory VAT registration which can have a significant impact on business profile.
Business loans are becoming a much more attractive option for SME businesses who have perhaps lacked confidence in the years since the financial crisis. Today’s business loans don’t need to be a high risk endeavour, especially when choosing business loans with low interest rates. Small businesses can identify suitable lenders by using online comparison tools which make it quick and easy to see available deals.
Business Loans FAQS
Maintaining a good business credit score is essential for loan approval. Having good credit also entitles you to competitive interest rates and favourable terms on your loan.
A loan can be a huge help when starting or expanding your business, but it’s essential to manage the funds efficiently so you keep track of what you have and where it has gone. Regular reviews of finances should be conducted, and it may be beneficial to open an additional business bank account for any funding received.
Business term loans are an increasingly popular way for small business owners to access funding for their operations. With a fixed interest rate and set repayment period, these loans offer more manageable monthly payments. The longer the repayment term, the lower your monthly expenses will be.
A hire purchase loan is a popular choice for larger businesses, providing them the funds to purchase new equipment. Alternatively, business finance leases allow you to spread the cost of buying machinery or office furniture over an agreed-upon period.
Business overdrafts or credit cards offer short-term financing and the advantage of avoiding costly interest charges. While these facilities can be beneficial when there is a cash flow gap, they should be considered a short-term solution and carefully considered before implementation.
Lenders differ in qualifying requirements but typically include your credit score (personal and business), how much money you want to borrow, your annual revenue and whether or not you own any assets that could be used as security. They may also ask you to submit a business plan.
For the fastest possible approval, apply with a lender specialising in online applications and speedy approvals. They typically approve customers quickly, sometimes even on the same day! But that doesn’t guarantee you the best deal; make sure you also compare rates and fees to ensure you’re getting the most competitive deal available.
Most lenders can make a fast lending decision on the same day or within 24 hours.
If you are looking for a long-term funding option, the interest rates from a small bank are generally going to be more favourable than online lenders.
The list includes (but may not be limited to: your credit history, income, employment status and current debt obligations.
Yes, a limited company will have a business credit score of its own.
- Reasonable interest rate.
- Quick loan disbursal
- Tax benefits.
- Flexible repayment plans
- No collateral needed
You will need to convince the bank that you can repay what you borrow and interest within the agreed timeframe
- Clearly identify how much you have available
- Identify how much you need
- Research different lenders
- Support your application
- Build cash flow projections
15% – 32% p.a.
No, as your company will have its credit record, your credit rating will not affect your chances of obtaining finance for your business.
If you are a sole trader, it is not likely. If applying for a credit card or loan, your credit score will be considered.
The loan amount, interest rates and repayment terms are essential to consider before taking out a business loan.
- Avoid defaults on your credit card bills and other payments.
- Clear debt on time.
- Lower your credit card usage to 50%
- Avoid applying to multiple lenders simultaneously.
Dun & Bradstreet, Equifax Business and Experian Business are the major agencies tracking business credit scores
Different Funding Options For Small Businesses
Small businesses have many financing options, from traditional loans from banks and online lenders to nontraditional methods like micro-loans, grant funding and crowdfunding. Understanding the distinctions between these options allows you to select the most suitable business loan for your requirements.
The amount of loan you need depends on several factors, including how long your business has been running, your income and your credit history. Additionally, consider whether or not you can afford the monthly repayments.
Lenders may ask why you need the money, so make sure you have a valid reason. Be prepared to explain how it will benefit your business and demonstrate how you plan to repay it promptly.
Your credit score is the most critical factor in whether or not you can be approved for a loan. With low personal credit scores, however, you may face higher interest rates and be turned down for most traditional business loans. On the other hand, some alternative lenders are willing to work with people even if their credit is less than ideal.
Faster Funding Options
Some business lending alternatives can process applications and approve loans within one week, making them ideal if you need funds urgently and need more time to wait for traditional bank or SBA loan approval.
Working capital loans, equipment financing, and merchant cash advances are short-term loans that provide quick access to funds for a specific project or expense. They can be used for covering operational costs and paying payroll; alternatively, they may be taken out to fund an entirely new endeavour that exceeds what has already been budgeted by your business.
Invoice factoring, also known as accounts receivable financing (AR), is a type of debt-based financing that enables businesses to exchange unpaid invoices for immediate cash flow. While this method may suit small businesses struggling to meet payment obligations, larger organisations may find other financing solutions more suitable.
Other types of loans include term loans, lines of credit and credit cards. They can cover various expenses, from paying for business supplies to hiring new employees.
Depending on your business’s size and current operations, you might qualify for a nonprofit or local government grant. Many grants focus on minority entrepreneurs or business development zones – an excellent option for new entrepreneurs or those aiming to expand in underserved communities.
Crowdfunding is an alternative source of capital that doesn’t require you to repay the funds or share equity in your business with investors. There are various models of crowdfunding, such as donation-based and equity crowdfunding.
These methods can be especially advantageous for startups needing access to traditional loan loans from lenders. To secure funding through a crowdfunding model, building solid relationships with potential donors and marketing your business effectively to attract attention is essential.
UK Business Loan Providers
Lloyds
Who Are Lloyds
Features of Lloyds
Why Choose Lloyds
Lloyds Business Loans – Selling Some of Its Loans on the Secondary Market
Lloyds is one of the UK’s ‘Big Four’ banks, boasting over 250 years of expertise in business banking. It provides a range of business accounts for startups and small and large enterprises, insurance, payments solutions and support for international trading.
The bank’s primary lending portfolio comprises commercial and personal loans, asset finance and debt capital markets, and business banking products and services. Furthermore, they provide overdrafts, credit and charge cards, invoice financing, and financial support for companies that import or export.
Recently, ShareAction and the Financial Conduct Authority investigated the ‘bounce back’ scheme, which revealed that Lloyds is the biggest lender to have violated CMA undertakings despite having been bailed out by taxpayers during the financial crisis. Their estimated 8.5 billion pounds in bounce-back loan lending contributed significantly to a fraud rate of 3.6% – higher than Barclays’ 2.4%, NatWest’s 1.7% and HSBC’s 1.3%.
According to a Financial Times (FT) report, Lloyds is offloading some loan portfolios to improve its balance sheet. Sources indicated that this sale could be worth several billion pounds and take place within the next week.
Meanwhile, the company has started selling senior loans on the secondary market, bypassing loan trading desks and enabling investors to take a more direct approach. According to bankers, these sales will allow the bank to reduce its portfolio of debt acquired at high valuations when the market is booming.
Sources reported that investors are being shown term loan A, revolving credit facilities, and longer-term term loan B and C tranches. The deals are estimated to be 95 percent of face value, helping the company reduce its debt portfolio.
Lloyds has a longstanding tradition of supporting small and medium-sized businesses, providing an accessible repayment window and no arrangement fees for loans under £25,000, plus no early repayment costs. Their business loans come in unsecured and secured forms with rates ranging from the Bank of England base rate to fixed ones.
For further instructions on applying, please consult our guide here.
Lloyds makes getting your business loan with them an effortless process. You can apply online, over the phone, or in a branch. After opening an account, making repayments is straightforward – check how much money remains to repay on their website at any given time.
You can alter your loan’s repayment schedule, make early repayments and extend its term; however, this comes at a cost and could lead to additional interest charges.
It is essential to remember that even a slight rise in interest rates could result in substantial increases in your costs, so always do some comparison shopping before committing to a bridging loan.
Lloyds Business Loans can be ideal for businesses seeking competitive and flexible finance solutions, but you must read the terms and conditions carefully before applying. Furthermore, ensure no hidden fees or costs are associated with your account – these could add up quickly over time.
British Business Bank
Who Are British Business Bank
British Business Bank provides a selection of government-backed business loans that can be used to foster the expansion of your new or existing venture. You may use these funds for various purposes, such as purchasing equipment, renting premises, creating prototypes and marketing your goods or services.
Features of British Business Bank
- British Business Bank’s Start Up Loans Company offers funding to individuals in the UK who wish to start a business, with up to £25,000 and free mentoring if your application is approved. They have an expansive network of delivery partners and an FCA-regulated finance partner who will collaborate with you throughout every step of the process for maximum convenience and ease.
- You can apply for a Start Up Loan through their website or application form. They’ll require you to submit a detailed business plan, cash flow forecast, personal credit history and address details.
- If your loan application is approved, money will be transferred directly into your business bank account, and you can use it however you wish. Nevertheless, remember that you must repay your loan in full at the end of its term; therefore, stay within budget.
- In addition to funding, Start Up Loans also provides mentoring for up to 12 months to assist you with running your business. Their team is dedicated to ensuring your experience is positive and is here to assist with every aspect of the startup process.
- The British Business Bank has granted over £800 million in loans to over 90,000 business ideas.
- Businesses across the UK have taken advantage of this government-backed scheme to secure their first business loan and launch their idea.
Why Choose British Business Bank
British Business Bank (BBB) is a government-owned development bank providing business loans since 2013. Their services range from asset-backed lending and leasing facilities, debt programs, enterprise finance guarantees, mezzanine financing and venture capital solutions.
When applying for a business loan, there are several things to consider:
- The amount of money needed
- Your credit history
- Submission of a business plan
- A cash flow forecast
Funding Circle
Who Are Funding Circle
Funding Circle is an online lender that uses peer-to-peer lending to finance small businesses. They offer various loan products, such as term and SBA loans, merchant cash advances and lines of credit.
Features of Funding Circle
- Business Loans: £25,000 – £500,000 – Funding Circle business loans provide small businesses with funds for expenses like buying equipment or inventory, expanding a location, hiring employees, marketing & advertising and restructuring debt.
- Compared to some other lenders, Funding Circle does not charge a prepayment fee on its loans – making it an attractive option for entrepreneurs who require immediate funds but want to avoid dealing with the lengthy application process of traditional banks.
- To be approved for a loan from Funding Circle, you must have been in business for at least two years and possess a personal credit score of 660 or higher. Furthermore, no personal bankruptcy must be on your record within seven years. In addition, you will need to sign both a personal guarantee and a business lien as security for the financing.
- A business line of credit from Funding Circle is a type of financing that allows you to borrow and repay funds as needed. It’s an ideal solution for keeping your cash flow uninterrupted by sudden emergencies.
Why Choose Funding Circle
Funding Circle charges an origination fee to cover processing your loan application and underwriting costs. The exact amount charged depends on how much you are approved for and your creditworthiness.
Iwoca Business Loans
Who Are Iwoca Business Loans
Iwoca is an online lender specialising in short-term loans to small businesses across the UK and Germany. Regulated by the Financial Conduct Authority (FCA) and a Consumer Credit Trade Association (CCTA) member, they provide loans with competitive interest rates to their clients. They strive to provide convenient, secure and speedy access to over 1,000 funding providers without affecting your credit rating.
Features of Iwoca Business Loans
- Their loans can be used for various reasons, such as expanding a business, filling cash flow gaps or hiring new staff members. Furthermore, they offer revenue-based and buy now, pay later options, so you can choose what works best for your situation.
- With two, you can apply for finance online in just minutes and transfer the funds directly into your business account within hours. They usually decide on your application within 24 hours; however, depending on the loan size required, this may take longer.
- The company provides a Flexi-Loan, a 12-month line of credit that’s non-secured against assets and allows customers to borrow up to £200,000 quickly with no early repayment fees. Furthermore, they provide revenue-based loans with monthly payments tailored towards your business’ fluctuating income streams.
- Before starting, you’ll need to link your business bank account with iwoca so they can view and assess your application. After linking, you can begin creating invoices for customers, and iwoca will add them directly to your account so you can receive payment from them.
- If you’re using Xero, iwoca can be integrated with your accounts to automatically generate and send invoices to customers from their invoices page. This saves time, eliminates manual entry, and allows you to focus on other business aspects.
- iwoca makes applying for finance simple with their Xero app, available from either the Xero App Store or via their website. Furthermore, you can link your Xero account with their online banking service so that you always have a safe and secure method to make repayments from your bank accounts.
Why Choose Iwoca Business Loans
Iwoca offers an unsecured business loan for Limited companies with 2+ years of filed accounts that will lend up to £250k for terms up to five years at a low upfront fee and rate of 8.5% annually.
You can also link your Xero accounting software to the iwoca lending platform, which enables you to generate invoices directly from iwoca for clients and automate your business’ finances using iwoca’s API. This saves time and helps grow your business.
Tide Business Loans
Who Are Tide Business Loans
Tide Business Loans offer short-term capital for your business. Various partners offer them, and you can apply for them within the Tide app. Not only do these loans provide extra funds quickly, but they may also assist in growing your company.
Features of Tide Business Loans
- Tide has been in the small business banking space for some time and recently acquired business loans marketplace Funding Options to expand its offering. This acquisition gives Tide access to an impressive pool of finance expertise within-house, giving customers more competitive rates when applying for business loans.
- Open Banking and Fast Loans – Tide’s open banking technology makes getting a business loan much faster than many competitors. Use Tide’s application to see what you qualify for; they will instantly decide whether you qualify.
- The company’s app allows you to track expenses on the go and has other features that can help save you money as a small business owner. It integrates with popular accounting software like Xero or QuickBooks, enabling you to create invoices directly from within your account.
- You can pay bills online or via your mobile phone and perform a variety of transactions with the bank’s Mastercard. Furthermore, it allows free transfers between accounts.
- Banking fees can be expensive, but Tide’s service is surprisingly budget-friendly. For instance, transferring funds between your Tide and other bank accounts is complimentary, while ATM cash withdrawals cost just £1 per withdrawal.
- No monthly fees apply, and its business account allows for easy financial management on the go. It boasts an array of great features, and its customer support team also provides exceptional support.
- Tide’s customer support is available via its app and can be accessed via phone call, email or online support form. Plus, Tide has a dedicated account manager who would be your go-to person for any issues that may arise.
Why Choose Tide Business Loans
The company enjoys an excellent reputation for customer service and has earned a glowing review base on consumer review site Trustpilot, where it currently holds a rating of 4.3 out of 5 stars with a Great impressive rating based on 14,615 reviews (updated February 2023).
As part of its credit builder scheme, Tide has assisted hundreds of small businesses to improve their credit scores and plans to help even more. Furthermore, it wants to provide affordable business loans and offer business credit cards and other products.
Natwest Business Loans
Who Are NatWest
Established in 1968, NatWest Business Loans is a top high-street bank with various funding solutions. These include asset finance, loans and funding schemes, and commercial mortgages for the property.
Natwest Business provides loans and funding solutions for small and large businesses, such as fixed-rate and variable-rate business loans, invoice finance services and real estate financing.
Features of Natwest Business Loans
- Bank of Ireland provides loans with terms ranging from three months to 25 years, depending on the type of finance you need. They also provide other business banking products like overdrafts and business credit cards.
- To qualify for a business loan, you must have an excellent credit rating, be over 18 and be the director of an established business that has yet to be declared bankrupt or received a CCJ. Furthermore, annual profit and revenue statements should provide proof of your business’s financial health, enabling the lender to determine whether or not you’re likely to repay the loan.
- Apply for a loan via the NatWest website by completing the application form. You have several repayment plans from there, and more information is available if needed. Alternatively, contact NatWest directly to explore your options in more depth.
- If you need additional funding, NatWest has an overdraft facility of £50,000 that’s unsecured and subject to credit approval. This will protect your business’s daily bank account balance against unpaid bills or unexpected costs. There’s no set minimum monthly payback amount; you can reduce it as often as desired.
- Another option is NatWest Rapid Cash, which lets you borrow against unpaid invoices. This can be an advantageous alternative to invoice factoring and more affordable than an unsecured business loan.
- As long as you can secure security in the form of a business debenture and personal guarantee for 10% of your maximum borrowing limit, Rapid Cash can fund all your day-to-day business requirements. You’ll need accounting software compatible with Rapid Cash, such as Sage 50, Sage Business Cloud, Xero, Quickbooks Online (Oracle NetSuite), KashFlow or FreeAgent).
- The interest rate will depend on the amount you borrow, but this loan option offers flexibility. There are no monthly or exit fees; you’ll only be charged interest if you go overdrawn.
Why Choose Natwest Business Loans
NatWest business customers can take a repayment holiday in case of an emergency. This gives you time off to recover from unforeseen events like childbirth or illness in your partner.
Not everyone will be approved for a business loan, so it’s worth trying to improve your credit score to boost your chances of approval. You can use credit referencing sites such as
TSB Business Loans
Who Are TSB Business Loans
As a high-street bank, TSB offers many great features – especially fixed-rate loans. Its application process and speedy approval for existing customers make it stand out. You can apply online, over the phone or in a TSB branch – whatever works best for you!
Features of TSB Business Loans
- TSB Business Banking App – The TSB Business Banking app is ideal for managing your account for small or medium-sized businesses. With it, you can make transfers, set up standing orders and authenticate transactions using your phone’s built-in security features – helping you stay organised and monitor expenses that leave your account. This helps keep costs under wraps too!
- TSB offers a range of business accounts, from startup to standard, school and charity options. All come with 18 months of free everyday banking and discounts from Enterprise Nation partners for growing your online business.
- Commercial Remortgages – Are your business operations ongoing yet require additional capital for expansion or purchasing equipment and stock? A commercial remortgage could be the perfect solution. These loans are secured and tailored to fit individual needs, with some banks allowing up to 70% of a property’s value to be borrowed as security.
- TSB Business Loans’ website offers helpful information about the loan you’re considering, such as what each payment will cost and how much you can borrow. It also outlines the various types of finance available so you can make an informed decision before applying.
- TSB Business Loans may only be suitable for some. Still, you can repay over an agreed period if you need a flexible, competitive loan. They could be worth considering. They are secure and have several advantages that help avoid unnecessary fees – ultimately saving you money in the long run.
- Remortgages offer a range of flexible terms, from one to 25 years. Plus, you can select a fixed interest rate for the term of your loan so that your payments remain consistent each month.
Why Choose TSB Business Loans
The business lending team will assess your financial situation and suggest the most suitable solution. After receiving their advice, you must complete a loan application.
You may take out an overdraft to cover any short-term cash needs. This is a flexible, cost-effective way of guaranteeing that you always have access to funds in emergencies.
MetroBank Business Loans
Who Are MetroBank Business Loans
Metro Bank can assist you with all your business loan needs, from unsecured short-term to secured longer-term ones. Furthermore, they offer a selection of current commercial accounts tailored to fit any need. So whether you’re just starting or have an established venture and need capital to fund your endeavour, Metro Bank is the answer.
Features of MetroBank Business Loans
- Established in 2010, Metro Bank is an English high-street bank with branches across England. It provides various banking products such as personal and business current accounts, deposit and investment accounts, plus mortgage solutions.
- Metro Bank could be ideal if you’re searching for a high-street bank with excellent customer service and transparent fees. They provide fast same-day account openings in both branches and online.
- They offer a business credit card with no annual fee and interest on purchases for up to 56 days. Furthermore, they provide business overdrafts with fixed or variable margins above Metro Bank’s base rate and loans of up to £25,000.
- Metro Bank Business Loans are available to businesses that meet specific criteria. Applicants must be legalised or naturalised Filipino citizens with documents proving their home address, office location, and proof of income from a regular job. After reviewing these documents, the lender will decide whether or not they can approve your application.
- Their representative APR is 4.9%, with the option to pay it back over one year or five years. Monthly repayments are fixed, and you can borrow up to £25,000 without any arrangement fees.
- Metro Bank Business Banking is tailored to small and medium-sized enterprises (SMEs). They offer various business accounts, such as a standard current account for companies with annual turnover up to £2 million and commercial accounts for those with more extensive operations.
- There are accounts tailored towards sole traders and companies without employees that offer 24/7 phone banking and free European transactions. A monthly fee of £5 applies if your balance falls below £5,000 at the end of each month.
Why Choose MetroBank Business Loans
Metro Bank Business Loans can be utilised for various reasons, such as managing cash flow and purchasing assets. Furthermore, the lender offers an efficient invoice finance facility to expedite payment processing and reduce debt accumulation.
Invoice and asset finance are forms of commercial financing that can help manage your cash flow and purchase equipment or machinery. Popular providers for these loans include Bibby Financial Services, RBS, Lloyds Bank and Barclays; however, other options may be available.
They’re relatively new to the high street banking world, but they’ve already established themselves as a provider of cost-effective, SME-focused products. Their selection of business loans is extensive, and customers appreciate their easy set-up process and upfront fees.
RBS Business Loans
Who Are RBS Business Loans
The Royal Bank of Scotland is one of the UK’s most recognisable high-street banks, offering a range of business loans for both small and large enterprises. Beyond offering competitive loan rates, RBS provides services and support to help you expand your business and succeed.
Features of RBS Business Loans
- Fixed Rate Loans – A fixed-rate loan offers budgeting security, as there’s no chance for interest rates to increase during your loan term. Alternatively, you could opt for a variable rate deal that exposes you to potential rate increases and allows for any reductions in those same rates.
- Asset Finance – Asset financing is ideal for your business to invest in new equipment without needing a sizable upfront loan. RBS offers various loans tailored to different needs, from office upgrades and IT purchases to fleet vehicles and investments. Whatever the purpose, RBS has a loan option that fits perfectly.
- Invoice Financing – RBS offers various working capital solutions, including invoice discounting and factoring, allowing you to unlock up to 90% of unpaid invoices. These can be an effective means for freeing cash from current accounts while improving your business’s creditworthiness.
- An RBS overdraft is a convenient way to access additional funds when needed, with no minimum required monthly and only paying interest on the amount used. The limit is based on your bank account balance and can be arranged online or over the phone. An arrangement fee ranging from £50 to £150 applies depending on how much is requested – no minimum is required!
- Payout Holidays and Capital Repayment holidays can be taken advantage of on many RBS business loans; however, these increase your overall cost, so it’s essential to carefully weigh their benefits before taking advantage of them.
Why Choose RBS Business Loans
RBS offers a variety of business banking products and services, such as business cards and invoice financing, in addition to loans. Its Business builder programme aims to assist you with starting and growing your company.
Furthermore, there are various growth events hosted by the bank, along with financial health checking services and resources designed to help you better understand your company’s finances.
HSBC Business Loans
Who Are HSBC Business Loans
HSBC is one of the world’s largest banks and offers many banking services, including business loans. It strives to provide businesses of all sizes with the finance they need. As one of HSBC’s UK SMEs, they offer business loans and overdrafts at an impressive 93% approval rate as of 2017.
The bank has recently established a £15 billion Small and Medium-sized Enterprises (SMEs) fund to promote business growth and investment in the UK. This initiative aims to provide access to capital for startups, small to medium-sized enterprises (SMEs), and existing businesses.
Features of HSBC Business Loans
- Comparing interest rates and terms to find the best deal can be challenging. HSBC offers online prequalification, allowing you to view different rates before submitting your application. Furthermore, unlike many other lenders, HSBC does not require a hard credit inquiry which could damage your credit scores.
- No matter the amount you need to borrow, HSBC has a business loan option tailored to fit your requirements and budget. Choose from small business loans, larger flexible business loans, or term loans for maximum flexibility.
- HSBC offers small business loans ranging from £1,000 to £25,000 with an APR of 7.1%. You can repay the loan monthly or quarterly over terms ranging from one to ten years, and HSBC even provides a repayment holiday, so you have more time to repay, but interest will still be charged during this period.
- For more significant loan amounts, HSBC offers a flexible business loan designed to aid larger companies and sole traders. This loan ranges from £25,000 to a maximum of £500,000 and can be paid back over 12 months to 20 years without current account access. Plus, its introductory interest-only repayment option means you can pay off the entire amount in 24 months – perfect for building up cash reserves for your business!
- Loans of this type can be used to cover everyday operational costs, such as paying employees or purchasing raw materials. They’re especially beneficial during reduced activity or while awaiting customer payments.
- Applying for an HSBC business loan is easy – apply online, by phone or in person at one of their branches. In addition, they offer interest-only loans tailored explicitly towards small and medium-sized enterprises (SMEs), which can be paid back over 24 months, allowing your business to build up cash reserves.
Why Choose HSBC Business Loans
HSBC boasted an excellent customer service reputation and was one of the highest-rated lenders for SME overdrafts in an independent survey. Furthermore, it ranks highly for business loan services.
HSBC business loan approval takes less than one minute, making the process incredibly user-friendly. They provide fixed and flexible business loans and interest-only payment options.
Barclays Business Loans
Who Are Barclays Business Loans
Barclays is a UK-based financial institution that offers various services, such as business loans. Their financing solutions are tailored to help small businesses expand and prosper. Their lending products include business mortgages, asset finance, invoice finance, and overdrafts.
Features of Barclays Business Loans
- Barclays business loans can be applied online, and you typically receive the funds in your account within 48 hours after approval. Use these funds to purchase equipment, expand your business operations or boost cash flow.
- Your interest rate is fixed for the life of your loan, meaning you’ll know exactly how much you’ll pay each month and can make overpayments or pay off early without incurring a penalty if needed.
- The bank offers several features to save time and effort, such as automated payments. This simplifies managing finances, and you can set up alerts to stay on top of expenses.
- These features will enable you to monitor your spending in real time. This can be an invaluable asset when making purchases for your business, providing the insight needed to make more informed decisions about budgeting.
- Furthermore, you’ll gain access to free credit reports and monitoring, which can be an excellent tool for improving your business’ credit score. Furthermore, if necessary, apply for a business credit card if making purchases with one.
- Due to their flexible terms and rates, Barclays business loans can be an attractive option for small businesses. However, comparing these prices with other lenders is wise to ensure you get the best deal available.
- The lender also provides an accessible online account centre to manage your loan and access its tools and resources. This can be especially beneficial if you have multiple accounts or need help keeping track of money.
- It may be beneficial for those with tight schedules to search for lenders who allow you to select your due date, as these options offer flexibility. Furthermore, you can repay the loan in full or spread it over several years.
- This is an ideal option for those searching to purchase new machinery, vehicles, or other items that will help your business flourish. Additionally, it can be utilised if you plan on expanding and need additional property.
Why Choose Barclays Business Loans
Many small businesses need help to secure the financing they require, making it essential to investigate alternative sources of capital. Thankfully, a range of nontraditional lenders has emerged, providing SMEs with an easy and fast access point for growth capital.
In the past, unsecured lending was often unavailable to small businesses with sound financials and accounts. Barclays now offers this alternative solution faster than traditional unsecured borrowing since there’s no need for land or property valuations, and everything can be done digitally.
Santander Business Loans
Who Are Santander Business Loans
Santander is the second-largest bank in Europe and provides various business banking services. They provide term loans, lines of credit and commercial real estate financing to small businesses across Europe.
Features of Santander Business Loans
- Santander offers its customers business insurance, cards, and various additional services. As a result, many people entrust Santander with all their financial requirements – and are satisfied with its results.
- Santander business loans can be ideal for small and medium-sized enterprises (SMEs) seeking funding to support their expansion or acquire equipment and other capital assets. But it’s essential to comprehend how a Santander loan works before applying.
- To obtain a Santander loan, the initial step is to fill out the application and provide personal information. After doing this, the lender will run a soft credit check that does not affect your credit score.
- If you meet Santander’s criteria, your application will be processed, and you may receive funds within three days. From there, you have two options: withdraw funds from your account or request a line of credit – an advance that provides additional cash flow.
- Before applying for a loan from Santander, creating an impressive business plan outlining your profit and loss and how the funding will enable you to reach your objectives is wise. Doing this will demonstrate to the bank that you have no debt obligations beyond loan payments.
- You should also provide information about your finances and assets that could serve as collateral for the loan. This could include equipment, inventory, or even equity in your home.
- To learn more about how a Santander loan can benefit you, speak to a loan specialist by visiting their website. You’ll also be able to locate your local business banking manager and arrange a call with them to go over any requirements you may have.
- Santander offers several loan products for small business clients, each with advantages and features. These include the Business or Growth Capital Loan, line of credit and overdraft facility.
- The Growth Capital Loan is an attractive choice for small and medium-sized enterprises (SMEs) with an annual turnover of £50 million or more, providing repayment terms of up to five years. It’s flexible and can be refinanced at the end of its term.
Why Choose Santander Business Loans
Santander business loans provide the capital you need to invest in new products, expand abroad and develop your company. They are also a reliable source of capital to cover other expenses like payroll or marketing costs.
Virgin Business Loans
Who Are Virgin Business Loans
Virgin Business Loans are tailored to SMEs and sole traders looking to expand their businesses. The company provides a selection of business accounts with various features designed to fit different requirements and budgets.
Features of Virgin Business Loans
- Their customer ratings on Trustpilot and Smart Money People are positive, with many satisfied customers satisfied with their service and rates. However, some current users have reported issues with the app and long waits to speak with a customer service representative.
- The Virgin Group has a history of creating innovative business models. For instance, their Virgin Money division experienced a phenomenal 70% growth over its last 11 months of operations and boasted an impressive customer base.
- Opening an M account is free for businesses with a turnover of £6.5 million or less. It features unlimited cash deposits and withdrawals with no monthly or transactional charges. Plus, it comes with complimentary money management tools to save time on admin tasks.
- Businesses with a higher turnover can take advantage of other options. A Professional Firms Client Account, designed for companies that hold clients’ money on behalf of the business, features no monthly or transactional charges and comes with 25 months of free day-to-day banking after opening the account, is one example.
- Virgin Group offers the Startup Loan for individuals seeking funding for their startup business venture. With this initiative, hundreds of people have launched their ventures and taken them to new heights.
- Virgin Business Loans offer a range of business support services to help businesses develop their plans for funding, such as an experienced business coach and comprehensive business plans with financial projections.
Why Choose Virgin Business Loans
Virgin Business Loans is a UK-based bank that offers various products to suit different needs and budgets. Owned by Clydesdale and Yorkshire Bank Group (CYBG), this company provides financing solutions for both personal and business use.
In addition to business products, the bank provides consumer loans, credit cards and savings accounts. As the 6th largest bank in the UK, they operate through more than 4,500 branches nationwide.
Love Finance
Who Are Love Finance
Established in 2012, Love Finance is a financial company that assists UK businesses in finding the appropriate funding type. It provides various loan products such as business cash advance, asset finance and van finance. Furthermore, it collaborates with various lenders to offer its customers various lending solutions.
Features of Love Finance
- Quick quotes, fast approval, and speedy payment make the process hassle-free.
- Loans for SMEs. Borrow £5,000-£250k in 24hrs.
- With Love Finance, you are in charge. No middleman,
- Their UK small business loans can be used for a variety of purposes, such as: Start-up costs, Working capital, Equipment purchases, and more.
Why Choose Love Finance
Can I take out more than one business loan with Love Finance?
Yes, it is possible to take out multiple business loans from Love finance; however, you must ensure you keep track of repayments for both. As the type of loan depends on which one you select, contact Love finance for further details.
Can I Use a Love Finance Business Loan to Purchase an Existing Business?
Yes, you can use a Love Finance business loan to purchase an existing business; however, be aware that these loans are more costly than other forms of business financing. They’re also more flexible, allowing you to choose the exact terms of your loan; however, it’s wise to double-check these details with the lender before making any final decisions.
Starling Bank
Who Are Starling Bank
Starling Bank, a relatively new lender for business loans, has made quite an impression in the industry since opening its virtual doors. Its founder Anna Boden has an impressive background in banking and technology which adds credibility to what the firm provides.
Starling stands out from most high street lenders by not having physical branches; instead, you must complete your application digitally. While this may seem intimidating for those used to more traditional bank processes, Starling provides a straightforward, streamlined alternative that makes applying easy.
Features of Starling Bank
- Applying for a business account is relatively straightforward. You download the app, fill in personal details and provide information about your business. Afterwards, it’s just a matter of sending a photo or recording a short video to verify your identity.
- Once you’ve opened a business account, you can apply for an unsecured term loan of up to £250,000 through the same mobile app. These loans are only available for limited companies trading for at least 18 months and must be repaid over one to five years.
- Starling Business Loans can assist in managing cash flow efficiently and growing your business by providing access to funds when needed. They’re ideal for smaller businesses or those with a flexible business model, as they can cover unexpected costs.
- To apply, you must meet specific eligibility criteria, such as having a current Starling business account and being registered as a limited company. Each director must also guarantee that an audit will be conducted during the application process.
- Though the loan process is straightforward, Starling’s lending experience is far superior to high-street banking. With no monthly fees and 24/7 customer support available via app, phone or email, it’s no wonder why so many have chosen to open a business account with them.
- Moreover, Starling makes it simple for businesses to connect their business account to Xero, QuickBooks and FreeAgent through their Business Marketplace. This enables your banking and accounting software to communicate in real time, giving you a comprehensive view of your finances so that informed decisions can be made about them.
- Starling Business accounts are popular with students and frequent travellers, as they allow you to store Euros without incurring any fees – helping you save money in the long run.
- Starling business bank account is designed for multi-device use, making it ideal for those who enjoy using cutting-edge technology. You can access it in English and French from your phone, tablet or PC.
- If you need extra funds, Starling Business Overdraft is a free option that lets you get money when needed without worrying about interest payments.
Why Choose Starling Bank
Connecting your Starling Business Account to accounting software can be incredibly useful, as it makes tracking expenses and filing tax returns a breeze. Plus, you’ll receive a complimentary premium Business Toolkit with features like a receipts/invoice tracker, cashflow forecast, VAT report, and more – all at no additional cost!
Capify
Who Are Capify
Capify Business Loans are short-term unsecured financing options designed specifically for small businesses. This is an excellent way to boost your business when needed and is incredibly flexible; you can decide how much you borrow and when it must be repaid.
Features of Capify
- Unsecured loans are unique among most SME funding providers, but Capify offers this choice to its customers. Furthermore, the lender allows you to apply for a top-up after repaying 60% of your initial loan – an invaluable resource if you are short on funds.
- Merchant Cash Advances – Capify’s merchant cash advance service is ideal for businesses that own credit card machines or EFTPOS terminals, providing you with an amount based on the money settled daily from those machines. This gives your business extra funds and allows it to pay it back over time with a percentage of each card payment taken – much more flexible and convenient than traditional business loans!
- Applying for a merchant cash advance online and receiving an instant quote is simple. Once approved, funds should usually be deposited into your account within 24 hours*. However, if you need the cash sooner or have any queries about your application, contact their customer support team to find a solution.
- These loans are perfect for businesses of any size. They can cover various expenses, from stocking up during busy seasons to refurnishing premises to improve your brand image or purchasing new equipment. Furthermore, you may use your business loan to invest in marketing and advertising, enabling you to reach an even wider audience.
- Capify stands out among online lenders by providing a total payback amount rather than an interest rate. You always know exactly how much you’ll be repaying and never have to worry about rising payments as long as you stay current with payments. This makes Capify one of the top merchant cash advances for small businesses and one of the best options for those in small startups.
Why Choose Capify
This company has built a reputation for providing unsurpassed customer service for over two decades. They take pride in their ethos and strive to stay true to it no matter the industry changes or shifts; this commitment is enshrined in their ‘Bill of Rights, ‘ which outlines their values and what they stand for.
They strive to guarantee their customer’s experience is positive and that they can assist your business in growing and succeeding. Furthermore, they provide flexible lending solutions, such as merchant cash advances and working capital facilities.
Small Business Loans Comparison
What are the Best Small Business Loans?
There’s good news for SMEs – approval for small business loans is on the rise, with 8 in 10 applications being approved and around £5.3bn of new lending was provided to support SMEs in the first quarter of 2017, according to the British Bankers Association. It is believed a greater awareness of alternative financial products – and indeed a greater availability of these products – has played a major role in transforming lending for small businesses. The question is, what are the best small business loans, and what should SMEs really be looking for in a good small business loan that will help them to grow and develop their business?
Quick Access
In today’s ever-changing economy, it’s vital for small businesses to be in a position to grab growth opportunities as and when they arise. This means that quick access to small business loans should be one of the most important deciding factors. Some banks are now offering same day credit upon approval, while alternative small business loans could be even better, with reports suggesting that the average period for invoice finance approval is just 8 hours under normal circumstances.
Simple Applications
While securing small business loans at the height of the financial crisis was challenging, there is no reason for modern businesses to jump through hoops for approval. While nearly half of all businesses thought it was difficult to get a small business loan in 2012, only 26 percent still hold that view today. Small business loans should be simple, and they can be. Alternative financing is especially simple, with informal lenders often having much more lenient criteria.
Affordable Interest Rates
A common concern when it comes to traditional bank loans for businesses is that small businesses are often not the most valuable demographic. Smaller loans are not in many banks’ best interests, which means they may charge higher interest rates to make an SME a more attractive investment. Businesses should not be paying higher interest rates for taking smaller amounts. If SMEs compare small business loans online at compareyourbusinesscosts.com, they can identify the best rates.
Small business loans of between £1000 and £25,000 can have significant benefits for startups and small companies striving to grow and develop within their chosen industry and sector. Small business loans can help boost profits, increase turnover, and make it a more realistic option to expand an existing workforce. Around half of all businesses in the UK fully expect to increase turnover after Brexit, and a greater access to small business loans is believed to play a major role in this confidence.
Tips for Small Business Lending
Here are 3 aspects that every SME should look for in a small business loan:
Fixed Interest Rates
According to Elite Business Magazine, more businesses are opting for fixed interest business loans than ever before to avoid ever rising rates, and this type of loan could be beneficial to small businesses, particularly start-ups and SMEs. Small businesses need to have a thorough grasp of their monthly outgoings to budget effectively for business growth and development, and an unexpected spike in interest rates can have a big and detrimental effect. While there is a chance that rates could reduce, for small businesses it might be worth paying a little more for the added security that comes with fixed rate business funding. Look for small business loans that offer fixed rate lending at a competitive price – you can find the best deals by comparing loans online.
No Early Repayment Fees
Uncertainty and unpredictability are two aspects of business growth that many SMEs and start-ups know only too well! While some businesses may struggle initially, others may experience unprecedented successes that leave them with the means to settle existing debts and become a more attractive option for potential clients. No business owner knows what’s going to happen, why it makes sense to leave your options open, and give yourself an opportunity to repay business loans earlier than planned without being penalised for your actions. Some commercial finance lenders do apply fees for early repayments, so look for small business loans that clearly state they will not charge early repayment fees should you wish to pay off your loan a little early.
Flexible Repayment Terms
Once again, it’s important that SMEs acknowledge there is a certain level of uncertainty that comes with running a small business and, it’s even more essential that businesses take measures to protect themselves should the worst happen. An inability to repay agreed monthly fees can negatively impact credit ratings and make it all the more difficult to secure commercial financing in the future, why a safety net is recommended. Many banks offer flexible repayment terms which often include features like 6 month repayment holidays that give businesses time to address financial situations and rectify problems without damaging their financial reputation. By using price comparison tools online, it’s simple to find business finance lenders offering these deals.
Some other benefits of a small business bank loan could include:
• Business credit card
• Small business line of credit
• Term Loan
• Commercial Mortgage
• Equipment Finance
Understanding Business Finance Options
Understanding Overdrafts
A common mistake many businesses make is they think an overdraft automatically offers a better deal than business loans because there’s no interest rate – they won’t be paying over and above what they borrow. However, as we know, that’s not true. While interest isn’t charged on overdrafts, overdraft fees are applicable and, in many cases, these fees can work out more expensive at the end of the day that a low interest small business loan. It’s been reported that in the past some banks have charged businesses equivalent to an 800,000 percent interest rate on overdrafts, when the interest rate for business loans can be as little as 8 percent!
Overdrafts can be beneficial for businesses at times when an unexpected charge has affected budgeting, but for planned long term growth, business funding will usually always be the more cost effective option for SMEs. By choosing small business loans that are specifically designed for growing SMEs and emerging industries, businesses can fund growth and development through marketing campaigns, improved resources, and expanding staff numbers, helping improve both online and offline visibility and awareness and increasing reputation, customer satisfaction and, ultimately, profits.
Compare Business Loans
Government-backed loans
If you’re a new or existing business struggling financially, some government-backed funding schemes can help you out. These include the Recovery Loan Scheme introduced to support businesses affected by the Covid-19 pandemic.
Applying for a business loan is easy and can be a great way to get funding for your company. However, it’s essential to understand how the process works and what you can expect from lenders before you apply.
Credit score
Reputable lenders will run a credit check when you apply for a loan, designed to assess your past financial behaviours and current ability to repay the loan. A good credit rating can increase your chances of being accepted and give you access to a lower interest rate.
Revenue
Lenders also consider your revenue when they’re making lending decisions; this is because they want to see that your business can make the repayments, so it’s vital that you have a stable source of income to cover these costs.
Finding a Business Loan Uk
Many different types of business finance are available to UK business owners, including secured and unsecured business loans. Secured business loans require you to offer up assets as security, making it easier for you to borrow more money at a lower interest rate than an unsecured loan.
A business loan is a way of borrowing money from a lender to cover the costs of a project, for example purchasing new stock or equipment. They can also help tide a business over during low trading or pay off bad debts.
Several business loans are available in the UK, each with different terms and conditions. Some are secured and require a company to provide collateral, while others are unsecured and do not require assets.
Bank loan:
The most common type of business loan, a bank or building society lends a sum of cash to your business and then lets you repay it over an agreed period with interest charges added. This is usually a short-term solution, so your monthly repayments will be higher than if you had a longer-term loan.
Revolving credit facilities:
Some larger businesses use a revolving credit facility to access funding, so they can borrow money when needed. These are typically longer-term solutions and generally offer a lower APR than a standard bank loan.
Alternative lenders:
There are many alternative types of financing available to UK businesses, including peer-to-peer lending and invoice discounting. These are typically online platforms where borrowers ‘match’ with investors who have money to invest.
It’s essential to shop around and compare each business loan’s fees before deciding which one is right for you. The key is to ensure you are getting a deal that suits your business’s needs and offers the best overall cost of borrowing, so make sure you understand all the costs involved, from interest rates to administration fees.
Getting a business loan is challenging, but you can improve your odds.
The first step is to find the best lender for your needs. Online lending platforms like Fundera connects small business borrowers with various lenders for loans, including SBA loans, lines of credit and term loans.
Personal credit history is one of the most critical factors when evaluating a small business loan application. Lenders use your credit score to predict your future ability to repay a loan.
Another critical factor is your business’s cash flow. If you demonstrate that your business has enough funds to support its debt payments, you’re more likely to be approved for a small business loan with reasonable terms.
A working capital loan, for example, is a short-term loan that helps you cover everyday expenses and other business needs while waiting to grow your business. These loans are typically used to cover wages, inventory and taxes while your business generates revenues.
On the other hand, equipment financing gives you cash upfront to buy new or used equipment. These loans are ideal for small businesses looking to purchase new equipment, like office furniture and copy machines.
Bad-credit options include invoice financing, which uses your unpaid customer invoices as collateral to get you a loan. These are more challenging to get than traditional business loans, but they can be a great way to help you meet your business’s growing needs while improving your credit.
A business loan is a financing option allowing businesses to borrow money to help with equipment purchases, inventory, or office space. They can also help grow a company and fund new ventures, such as hiring an additional staff member or acquiring a new location.
The amount of money a lender offers to a business depends on several factors, including the type of loan you need and your credit history. You should only apply for a business loan if you can repay it on time.
Business loans typically require collateral, including tangible assets such as real estate and equipment. They can also be backed by future earnings, which include accounts receivable and invoices.
Your debt-to-income ratio is another important factor lenders consider. It’s calculated as your monthly debt payments divided by your monthly income. Lenders typically want a DTI ratio of 40%-50%, but this may vary depending on your financial situation.
Term loans are another common type of financing that’s available through banks and online lenders. These are typically repaid over a period of between two and ten years.
You can usually expect to borrow up to $500,000 through a term loan. However, the eligibility requirements can be more stringent than other small-business loans, as you will likely need to have been in business for at least two years.
It would help if you always used a loan calculator to calculate the total cost of your small-business loan before you make a decision. That includes everything from interest to fees, so be sure to shop around to find the best deal.
Startup business loans in the UK provide finance to help new businesses start and grow. These can be secured or unsecured for between £1,000 and £500,000. They usually offer flexible terms and can be used for various purposes, including developing prototypes, testing products, purchasing machinery, relocating, marketing, etc.
The government-backed Start Up Loans scheme has supported over 80,000 business ideas and helps to kickstart nearly 68,000 businesses. This programme is available at a fixed interest rate through partners and comes with 12 months of free mentoring, so it’s worth checking it out if you’re looking to start your own business in the UK.
Startups tend to need help accessing traditional business loans, and this can leave them at a disadvantage; this is why the government launched a special fund to support those who typically struggle to raise money for their business.
You’ll need to submit a detailed business plan and cash flow forecast, alongside some personal information, when applying for a startup business loan; this allows the lender to assess your plan’s affordability and strength.
Several different lenders, including online and traditional high street banks, offer a range of options for startups. Some, like HSBC, also offer negotiable repayment terms.
It’s always a good idea to shop around for the best rates and terms before making a final decision; this will save you time and hassle in the long run. To make the process easier, you can use a comparison site, such as Money Supermarket, that searches the market for funding options and shows competing for offers from multiple providers in one place.
A government business loan in the UK is a great way to secure funding if you’re looking to set up an early-stage business. They have a fixed interest rate of 6%, less than many other business loans, and there are no fees or administrative charges. However, considering this option, you should also know that it comes with some stringent eligibility criteria, so it is best to research before applying.
Start-Up Loans
The Government launched the start-up loan scheme in 2012 and is backed by the British Business Bank plc, which has supported over 90,000 business ideas with over £800 million worth of loans. This scheme is specifically designed for beginners and features 12 months of free mentoring, fixed interest rates and no fees.
Coronavirus Recovery Loans and Guarantee schemes
A business that has suffered an adverse impact from the Covid-19 pandemic is eligible to apply for a Government loan. These are available through accredited lenders (listed on the Government-owned British Business Bank website) and are backed by the Government. The Government will provide a guarantee of up to 80% of the value of each loan.
Applicants are required to produce a business plan and cash flow forecast and run a personal credit check. This ensures that the loan will be used for a legitimate purpose and that you can afford to repay it.
Eligible companies are limited companies, sole traders or partnerships. The director of the business must be aged 18 or above and a resident of the UK with the right to work in the UK.
Asset Backed Finance
What is Asset Backed Finance?
Asset finance has grown by a total of 6 percent in the past year, according to the Finance and Leasing Association, and more and more small businesses are beginning to show an interest in this form of business loan. IT-based asset finance is showing improvements of 39 percent since 2014, and machinery and vehicle asset finance have grown by an estimated 6 percent and 21 percent respectively, but just what is asset finance, and how could it help emerge small companies? The concept of asset finance is simple – whereas property is used as collateral in commercial mortgages, and debts are used as collateral with traditional business loans, assets are collateral when it comes to asset finance. Asset finance is most commonly utilised by businesses who require physical equipment to help them grow and develop, but don’t wish to use day-to-day cash flow resources to fund these new assets. The primary advantage of asset finance is to save on the initial costs of new business equipment, which can free up cash for business expansion and innovation.
Types of Asset Backed Finance
While there are many types of asset finance available, there are two variations that are proving to be popular amongst growing SMEs: leasing, and hire purchasing.
- Leasing Leasing asset finance is when the chosen lender retains ownership of the equipment. The equipment is simply leased from the lender for as long as required.
- Hire Purchasing purchasing asset finance is when the lender retains ownership of equipment until the business has made enough repayments to cover the full costs.
Whichever type of asset finance a business chooses, lenders will typically offer rates for ‘hard’ assets, like manufacturing equipment, and ‘soft’ assets, including IT software. Funding is provided in exchange for a security interest in a business’’ most valuable assets.
Benefits of Asset Backed Finance for Small Businesses
There’s two primary benefits for small businesses taking out asset finance – typically approval rates are higher than for traditional banks loans for SMEs, and asset finance is, on the whole, less risky for the borrower. Approval rates are higher because lenders retain ownership of the assets until repayments have been made in full – if a business fails to make repayments, lenders don’t lose out financially. And it’s less risky for borrowers simply because if repayments aren’t made, a company loses nothing but the asset collateral – not their premises, or their business.
SMEs may also find that rates for asset finance are more attractive than for traditional lending. Compare asset finance rates online at compareyourbusinesscosts.com to see if your business could find an affordable deal that could directly facilitate growth and development for your company.
Alternative Business Loans
Which Alternative Finance Product is Best?
The value of the alternative finance market in the UK grown by 44% in 2016 compared 2015 as more and more businesses shy away from high street banks and begin to look into alternative finance products as a more efficient and effective way of growing and developing their emerging brand. However, ‘alternative finance’ is an umbrella term, covering many types of alternative finance options – so which is the right choice for your business, and how can you get the best deal?
If you’re interested in increasing your growth capital to purchase new premises, buy equipment, or expand your workforce through alternative finance products, here are some questions to be asking:
Do I Have Security?
Solution: Asset Based Financing (ABF)
If a business has security in the way of assets, it makes sense to offer this security as collateral against a business loan. ‘Security’, in this sense, is a lax term, and can be used to describe accounts receivable, inventory, or property – anything that can help reduce the risk for lenders. Due to this, this type of alternative finance is usually best suited to manufacturing companies, or those with warehouses, storage facilities, or high end equipment – the value of the loan is only as good as your assets. For some businesses, ABF can be a cost effective way to free up cash flow capital quickly.
Am I Willing to Offer Equity?
Solution: Peer-to-Peer Lending (P2P)
Not all businesses are prepared to go down the equity route, rather than the debt route, but it can work out well for some companies – particularly start ups and other young businesses. While P2P can sometimes be debt-based, many lenders prefer to invest. This can be good news – investors are usually aware of the risks involved, and in many cases a company will not be expected to repay an investor should the business fail. Investors can also bring sound knowledge and experience to the table which can guide new businesses and help them develop along the most effective pathways.
Do I Have Good Net Profits?
Solution: Invoice Trading
While you may have good net profits, you may not have a particularly good cash flow status. However, this can be used to a business’ advantage. How? Through invoice trading – a very popular alternative finance product. The arrangement is simple – unpaid invoices for goods or services are sold to lenders, who pay a percentage of the amount owed. Clients, in turn, repay the lender. For businesses making good sales month on month, the amount of cash available can be significant. It’s believed that the value of the UK’s invoice trading market is greater than the US and Germany’s combined!
Finding the Best Alternative Finance Arrangements
With so many alternative finance lenders offering business loans today, the market is fast becoming highly competitive. This is great news for small businesses, as it means interest rates are typically dropping as more and more lenders strive to become the most attractive option. Businesses can compare alternative finance options online at comapreyourbusinesscosts.com to identify the right providers and the right deals for their company.
James Ward is CEO and founder of CompareYourBusinessCosts.co.uk, a website that won the Prestigious ‘Website of the Year’ only in its second year of operations in 2015. The website has grown organically since then offering comparisons on over 20 different products including insurance, energy, telecoms, card machines, coffee machines and much more. James has a range of interests including horse racing, skiing, rugby and boxing. He splits his time between home family life, friends, exercise and socialising.