Cheap business loans: what you need to knowPublished on 5th November 2018 2018-11-05T11:28:25+00:00 - Last update on 20th March 2020 2020-03-20T10:58:16+00:00
Looking for a cheap business loan? Business Loans are a great way of borrowing capital on either a short- or long-term basis and are suitable for a wide range of purposes. But the question of whether you can get a cheap business loan depends entirely on your own individual financial situation and where you choose to apply. Yet, there are steps you can take to make your application more enticing to lenders. So, if you’re in need of additional capital and are searching Google for cheap business loans, here’s what you need to know.
What’s your current financial situation?
When looking for the cheapest loan options for your business, the first thing you should do is review your current financial situation, which can be done by checking your credit profile. It is especially important to make sure there are no errors on your credit profile as lenders will always request permission to review it, incorporating into their checks factors such as whether you have recent and/or past CCJs, Accelerated Payment Notices, existing finance agreements (e.g. credit card debts) and your history of paying off debt on time. If there are any issues, be aware that not only will they affect your chances of getting approved, they’ll also determine the amount of interest your business is charged.
So before placing an application, you should always generate a credit report with one of the UK’s leading credit agencies (Equifax, Experian and TransUnion). Doing so will give you the opportunity to spot any problems which may be affecting your credit rating and, if possible, resolve them. Just of some the ways in which can improve your score are:
- consistently pay bills on time
- resolve outstanding CCJs
- reduce your credit utilisation ratio
- increase your credit limit but also reduce credit card spending
- dispute any errors that you find (providing sufficient proof to the credit agency responsible).
Are you providing collateral?
Another key aspect determining the overall cost of the agreement is whether you’re applying for a Secured or Unsecured Business Loan. Secured Business Loans allow your business to borrow anything from £5,000 - £1,000,000, but require you to present unencumbered assets (equipment, machinery, vehicles or property) as collateral as part of the agreement. Although this helps to raise lender confidence and, perhaps, offer a more favourable interest rate, doing so does involve putting the asset at risk of being repossessed in the event your business defaults on its payments.
On the other hand, if you don’t possess any assets or prefer to not put them at risk, you could, instead, apply for an Unsecured Business Loan which may allow you to borrow between £5,000 - £250,000. However, you’ll be charged more interest compared with a Secured Business Loan and will be subject to stricter application requirements on account of the increased risk to the lender, should they approve your request.
As such you need to think carefully about what you want from the agreement. Do you want a cheaper interest rate, or would you rather your assets weren’t put at risk?
Have you compared business loan providers?
In addition to interest, you also need to consider what service fees may be applied. This differs from lender to lender, so you should read the documents provided by each lender you’re considering. Nevertheless, some of the charges you may encounter include set up fees, origination fees (e.g. administration), underwriting fees, closing costs and legal costs. But by shopping around, you could seek to reduce or even remove some of these costs. So although you may have a preference for a particular lender, looking at what other lenders may be charging for a similar agreement could give you more leverage during the negotiation phase.
Thinking about applying for a cheap Business Loan?
Whether your goal is to support growth or maintain day-to-day operations, the obstacle standing in your way might be a lack of capital. But by applying for a Business Loan, you could raise the funds that you need to achieve these goals. However, your next concern might be the cost of borrowing, which is understandable. Fortunately, the Alternative Finance industry is offering you access to more business finance solutions than ever before, including products you may not even be aware of. All you need to do is figure out where to find them, which is where we can help.
At Rangewell, we’re an Access to Finance specialist and have mapped over 400 lenders to offer you a comprehensive overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the application process. So whether you're looking for specific, secured business loans to full finance for vineyards, and every sector in between, apply for funding today or find out more with Rangewell.
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