Business Loans are a way of borrowing money, where you borrow a fixed amount of money and you repay this with an agreed timeframe.
A business loan can be a great option if you need an injection of cash to start a business or make a big purchase, they can also be useful to help you cover the day to day expense of running a business while you are developing or marketing a new product or service.
Arranging a business loan
Prior to arranging a business loan, you will need to work out exactly how much you want to borrow, over what time frame and you will need to choose the type of loan, whether it be fixed, capped or variable rate. There are a variety of different business loans available and the cost and flexibility of these loans will vary.
You also need to think about your repayments, and work out how much you can afford. The repayment amount will depend on the size and duration of the loan and the rate of interest.
Securing a business loan
You will also need to persuade the lender to lend to you, depending on your circumstances they may request some security for the loan, or they make look for you to also make an investment in the business. Lenders will usually require you to make a presentation, so make sure you practice it, most business loans are turned down due to poor presentations and business plans.
The costs of a business loan
The terms and cost of the loan will also vary between lenders, so make sure you shop around in order to get the best deal and be aware of any hidden charges, potential penalties, and fees before you sign on the dotted line.
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
The benefits of business loans
You can make the repayment over a number of years
You can use the loan for whatever you want
You can often choose whether the rate is fixed, variable or capped
You can pay interest monthly or quarterly
Lenders offer highly competitive rates