Whether you require a short-term cash boost to cover a sudden expense or a long-term solution to facilitate business growth, the world of business loans can be a confusing place. To make life easier, here's a rundown of some of the main types of loan provider that exist within the UK.
Commercial Loans In The UK – Who Offers Them & How Can You Apply?
1) Government-Backed Schemes
Government-backed 'Start-Up Loans' are technically personal loans, but only the owners and partners of new businesses can take them out. They're available for one to five years at a fixed interest rate (currently 6% per annum). Each company owner or partner can borrow from £500 to £25,000, with a total limit of £100,000 per business. You can apply online and request assistance to prepare your business plan but, in order to be eligible, your business must have been fully trading for less than two years and you must be unable to secure funding from any other source.
2) Conventional Lenders
Some conventional lenders, such as high street and online banks, offer a range of secured and unsecured commercial loans. However, their rates, repayment terms, eligibility restrictions, fees, and terms and conditions vary, so it's important to shop around rather than simply heading to your usual bank. You can usually apply for these loans directly, either in person or online, but it can be difficult for SMEs, particularly start-ups and companies with few assets, to obtain them.
3) Peer-to-Peer Platforms
Peer-to-peer platforms provide loans funded by numerous small investors, rather than by single providers. One of the key advantages for SME owners is that the qualifying criteria for these loans are often less strict than for those provided by conventional lenders. You can only apply for them online and the process is usually quick and easy. However, the interest rates offered can be significantly higher than those imposed by traditional lenders.
4) Specialist Companies
Many alternative lenders specialise in providing finance to businesses regardless of the length of their trading history or their size. Again, you'll need to compare the products that they offer carefully to find the most suitable option for your business, but it could be a worthwhile thing to do. You can often apply for these loans online, but make sure that you choose a reputable company.
Finding A Business Loan - Your Next Steps
If you're considering any of these options, we'd recommend taking advice from an independent expert. To find out how we can match you with suitable loan providers, just get in touch.
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