What are Business Loans? - Business Finance

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Business Loans

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

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This website has been written and intended for registered limited companies in the UK only. The site contains general information and resources for limited companies only in financial trouble. Insolvency Helpline only work with limited companies to offer solutions for their business debt problems. Insolvency Helpline cannot offer help or advice any other entity except limited companies. Insolvency Helpline does not advise individuals, sole traders or partnerships seeking debt advice. If you are an individual, sole trader or partnership seeking advice, we recommend using an alternative service.

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