Business loans

Business loans explained

What is a business loan?

Businesses need to grow, and this often requires funding. As a start-up you could look for an investor to bolster your capital, but this means you’ll likely need to give up some of the ownership in your company.

As an alternative, you could opt for a business loan.

A business loan is when your business borrows money from a lender and repays this sum over a certain period at a rate of interest. It can be likened to a personal loan, where an individual would borrow money to pay for car, home renovations, or to consolidate debt. However, there are some key differences to remember. 

How do business loans work?

Unlike personal loans, business loans can be secured or unsecured.

The difference between secured and unsecured loans is explained in more detail in a separate guide, but in essence some business loans require you to put up a form of collateral if you fail to meet your repayments. This collateral can be your business premises, stock, or another valuable asset.  

In addition, some business loans are also unregulated.

The benefits of a business loan

Taking out a business loan can come with a range of benefits.

According to our preferred brokers at Watts Commercial, an unsecured business loan doesn’t come with any early repayment charges and can be approved within 48 hours.

How to get the best business loan

Make sure to use the charts above to compare the best rates on the market. This should help you identify some of the best business loans available, including the minimum advances and terms on these products.

Otherwise if you still find the process of finding an applying for a personal loan daunting, then why not consult a broker? Our partners at Watts Commercial are one of the UK’s fastest growing independent financial consultancies. You can speak to them today about the best lending options available to you. 

What do I need to apply for a business loan?

To qualify for a business loan, you and your business must meet a range of different requirements.

You’ll need a form of ID and proof that your company is a registered entity. This is just the start, as you’ll also need to show bank statements for your account and your results over a certain period.

At this stage we’d like to point out that you can get a business loan if your company has been trading for less than two years. You might not be able to qualify for some offers, but there are lenders who can provide you with some form of financing.

Who can get a business loan?

Anyone who’s over the age of 18, a UK resident and owns or is starting up a business can apply for business loans in the UK.

Does my personal credit score affect my application for business

In addition to your business’s information, your personal information can also have an impact on your application for a business loan.

If you have a poor credit history this could slightly impact the type of rates you’ll be offered, however it won’t define your application. Lenders place a greater emphasis on your business’s health, so make sure you’ve done all you can to improve this first.

With that being said if there is a county court judgement (CCJ) against your name some lenders won’t do any business with you, no matter the state of your business’s finances.