Business Loans From High-street Banks
The UK has some of the most competitive business loans and credit card products globally, with competitive rates and flexible loan opportunities. A business loan can help you maximise your investment in your own company or venture as long as you are willing to make regular repayments. This type of lending is often a far more cost-effective solution for businesses than high-street banks, typically carrying a higher interest rate than the alternatives.
Business loans can be applied for online, via the phone or in a branch. There are two types of business loans available: secured and unsecured. A secured loan involves putting an asset in to secure it, such as a vehicle or equipment. This loan is often just for the short-term, but you will have to pay back the principal and interest again at the end of the loan term with your own money. An unsecured loan is simply for your use – meaning you don’t need to put anything in to secure it because there is no collateral.
The UK is home to some of the most competitive rates and flexible lending opportunities globally. However, it is essential to understand that you will be charged a late fee along with the principal in the event of defaulting on a loan payment. The cost of business loans can vary depending on which company or bank you choose to deal with, but several factors will affect your chances of obtaining a loan. A business may be eligible for an unsecured loan as long as it has been established for more than three years and has a high net worth, while secured loans generally require collateral from the borrower (although some lenders may offer unsecured loans with collateral).
High-street banks
High-street banks were primarily designed for the average consumer who wants to borrow for personal use or a short-term loan. They usually carry a higher interest than other business loans in return for the convenience and comforting familiarity of using a high-street bank. However, suppose you are willing to go through the process of securing a loan with collateral. In that case, several specialist firms and investors will provide business loans to you with competitive rates and an established reputation for this type of lending.
Aside from these advantages, business loans are usually relatively easy to apply for online or over the phone with competitive rates. You can also choose from different levels of term and repayment terms. This is beneficial because it allows you to choose which options work best with your business.
However, one major disadvantage with these loans is that they usually carry a monthly fee in addition to the interest – making it more expensive than other forms of credit. Business loans also tend to be for a shorter period than other forms of financing. Still, if you can secure a loan for longer, this will help reduce the amount of interest you pay overall and make your total cost more competitive.
Banks offering Business Loans
- Santander: £25,000 to £3,000,000. Rate 4.9% to 54.9% APR with terms up to 60 months. A loan can be secured or unsecured but must be a minimum of £10,000
- Barclays: For a new business – max £250,000 and high-growth business (more than two years trading) – max £2m. Rates start at 7.8% APR with terms up to 60 months
- HSBC: Apply via the HSBC website. Rates between 7.7% and 9.9% APR depending on the amount with terms up to 60 months
- Sage: For credit card, overdraft or business cash advances – the rate of 7.9% APR with terms up to 60 months
- RBS: Loan amounts of £1,000 – £10m. Rates start at 8.9% APR with terms up to 60 months (for standard business loans) and five years (for high-growth business loans)
Business Loans: How Much Can I Borrow?
The amount you can borrow will depend on several factors, including your income and turnover, personal credit rating and your existing business assets, as there may be a requirement for collateral. You can apply for a loan that is less than £50,000 – Santander and Barclays offer £25,000 to £3m loans – but generally speaking, the more money you need, the higher rate of interest you will be offered by competing companies.
Business Loans – Repayment Terms
Loan repayment terms range from one month to 60 months for business loans. For secured loans, you may be required to make monthly payments with a fixed term of between one and five years (depending on the lender), or it could be an open-ended arrangement where the loan is repaid at once after your term. For unsecured business loans, you must repay these amounts within a maximum period of five years.
Concerns With High-street Banks
The biggest issue with high-street banks is the interest rate, which is far higher than the alternatives for business loans. They also tend to be less flexible, and there may not be a representative in-store or on the phone available to talk you through your options.
Concerns With Business Loans from Alternative Firms
Some of the biggest concerns with business loans from alternative firms are that the interest rates can be higher than high-street banks, and it may be harder to get feedback or speak to a representative. However, they are likely to be far more flexible in their lending policies and offer better deals for those who find themselves unable to repay a high amount in monthly instalments.
Funding options discuss obtaining business loans with bad credit in more detail here.
Other useful links about loans:
How to Get a Startup Business Loan
5 Benefits of a Business Car Lease
How to Get a Business Loan
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