Are you a small business owner looking for ways to start or grow your company? Loans can be complicated and overwhelming, but we’re here to help simplify the process and point you in the right direction. We’ll show you some of the best small business loans available and guide you through the decision-making process.
Is a small business loan right for your company? The answer depends on the type of business you have, how established it is, and what you need the loan for. For example, some loans may not be suitable for seasonal businesses, as making repayments during off-peak times can be a challenge. In such cases, alternative funding options like friends and family, crowdfunding, incubators, venture capital, or small business grants may be worth considering. Additionally, switching your business bank account could be beneficial for your business. We have put together a comprehensive list of the best business bank accounts open to UK SMEs for your convenience.
If you’ve decided to pursue a small business loan, there are steps you can take to improve your chances of securing one. Clearly outline how much you need to borrow and what the loan will be used for. Incorporate the loan into your business plan and have a cash flow forecast ready, including loan repayments. These documents are particularly beneficial for new businesses with a limited trading history. It’s advisable to have an accountant review them before you apply for the loan. Furthermore, having an updated website and a strong social media presence are essential, as lenders may review them when considering your loan application.
Worried about your credit score? It’s possible to obtain a small business loan with bad credit, but you may be limited to smaller loans and higher interest rates. Seeking out a firm that will perform a ‘soft’ credit check can give you an idea of where you stand without affecting your credit score. Keep in mind that lenders may require details of partners, directors, members, or signatories of your business, and any issues with their credit histories could affect your chances of obtaining funds. If you’re uncertain about your credit score, ask a credit checking firm for your credit report – some larger ones offer free trials.
When it comes to choosing between secured and unsecured loans, there are several factors to consider. A secured loan lowers the lender’s risk by using an asset or guarantor as collateral, potentially allowing for higher loan amounts. On the other hand, unsecured loans do not require a guarantor or asset but may come with higher interest rates and lower borrowing limits. It’s essential to understand the differences between the two before making a decision.
Many high street banks offer small business loans, each with its own set of terms and eligibility criteria. Here’s a quick overview of what some of the major banks have to offer:
– HSBC: Loan amount: £1,000-£25,000, Repayment period: 12 months-10 years, Eligibility: Cash flow forecast and business plan required
– Barclays: Loan amount: Up to £100,000, Repayment period: 1-10 years, Eligibility: Sole trader, partnership, limited company, charity, club, or association
– RBS/NatWest: Loan amount: £1,000 to £50,000, Repayment period: 1-7 years, Eligibility: Good credit rating without history of CCJs or bankruptcy
– Lloyds: Loan amount: £1,000-£50,000, Repayment period: 1-25 years, Eligibility: Loan must be for business use
– Yorkshire Bank: Loan amount: £25,001-£10,000,000, Repayment period: Up to 15 years, Eligibility: UK-based business
– TSB: Loan amount: £1,000-£1,000,000, Repayment period: 1-10 years, Eligibility: Sole trader, partner or director who requires the loan for business use
– Metro Bank: Loan amount: £2,000-£60,000, Repayment period: 1-5 years, Eligibility: Must have a business bank account with Metro Bank
Several digital banking platforms also offer business loans, providing additional opportunities for small business owners looking for financial assistance:
– Starling Bank: Loan amount: £25,000-£250,000, Repayment period: 12-72 months, Eligibility: Limited liability companies and partnerships
It’s important to note that loan availability and terms may change, so it’s always best to check directly with the provider before making any decisions. When considering a loan, it’s crucial to weigh the benefits and drawbacks of each option to make an informed choice that best suits the needs of your business.