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Guide to arranging a small business loan

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Guide to arranging a small business loan

A small business loan may be useful if your business is struggling to keep on top of its cash flow. Cash is king in business and even if your business is turning a profit, you may find that you simply don’t have the cash that you when you need it.

There are plenty of options available to small business that need to borrow money, and they don’t all require you to offer up your assets as security.

The types of loans available

Once you have decided that a small business loan is the right option for you, you need to find a loan that is flexible and cost effective.
The options include:

  • An agreed business overdraft
  • A fixed, variable or capped loan
  • Asset finance
  • A commercial mortgage
  • Invoice Finance- Discounting or Factoring

Each option has its advantages and disadvantages, for example overdrafts are quick and easy to set up, and are flexible but they require some form of security.

How to arrange the loan

Due to the range of finance options available, it can be confusing and daunting working out what is the best solution for your business. Therefore it may be worth getting some professional advice from an independent commercial finance professional. Not only will they be able to advise you on the best solution for you, they will be able to introduce you to the right lenders and help you arrange the loan.

Getting all the details in order

Prior to arranging your business loan, you will need to know exactly how much money you need to borrow, and what you need the money for.

The timing of applying for your business loan is also crucial, if you apply too late your business may suffer, and if you apply too soon, you may be left paying unnecessary interest payments.

Lenders may also require a form of security to secure the loan, this may include a personal guarantee, so be prepared.

The rates and amounts for business loans differ depending on several factors such as whether you have:

  • A clear and rational business plan, which shows projected and realistic cash flow
  • Personal and business assets which can be offered as collateral
  • A good credit rating
  • A profitable business and you can demonstrate your trading history
  • Invested a stake in your own business
  • Fully understood your market

Finally when applying for a loan you will need to make a presentation to the lender, it is important to plan and prepare this well in advance so that you stand the best chance of getting the best deal.

For further information regarding business loans please contact our advice team on 0800 597 4757 or apply online using the form opposite.

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