How do you qualify for a Business Loan?Published on 13th August 2018 2018-08-13T15:15:47+00:00 - Last update on 12th September 2018 2018-09-12T23:24:58+00:00
Despite being a feature of the UK lending landscape for years, too many business owners are still unaware of the benefits of Business Loans as well as how to apply for one. It’s an unfortunate issue resulting in business owners not taking advantage of the support mechanisms they need to further their goals. This need to change. If you’re looking to raise funds for your business but aren’t sure how to go about it, here’s what you need in order to qualify for a Business Loan.
How much do you need to borrow?
In order to grant your business the support it needs to thrive and achieve a sustainable future, you need to be clear on what you need. Having a figure in mind when approaching lenders will help you to decide whether you need a Secured or Unsecured business loan. With an Unsecured business loan you could borrow a lump sum ranging from £5,000 - £250,000 but if you require a larger amount, a Secured business loan could provide you with up to £1,000,000. As such, knowing what you’re looking to achieve and how is vital.
For example, if you need finance to support an upcoming project, it’s essential that you take into account all relevant costs and expenses involved. This could range from labour, materials, planning and energy usage to name just a few. Only by understanding your potential costs can you be certain that you’re applying for the most suitable agreement, especially since not borrowing enough could lead to you having to take out another finance agreement and being subject to two separate repayment schemes.
Are you able to provide security?
If you’re intent on applying for a Secured business loan, you will be required to present assets such as equipment, machinery, vehicles or property as security. Should your business default, your assets will be at risk of repossession, allowing lenders to recover the remaining capital owed to them in the agreement. However, it’s worth noting that presenting collateral raises lender confidence and may enable you to receive a more favourable interest rate as a result.
However, if you lack sufficient assets or prefer not to put them at risk, you could apply for an Unsecured business loan instead. However, because no collateral is involved it exposes lenders to greater risk, causing them to charge more interest. Plus, if you possess an adverse crediting, qualifying could prove challenging. If you do, you may wish to consider offering lenders a Personal Guarantee in order to improve your chances of being accepted.
Have you checked your credit score?
Before placing an application for any type of business loan, you should always check your credit profile. You can do this by generating a report with one of the UK’s leading credit agencies: Experian, Equifax and Callcredit. This gives you the chance to see whether there are any issues that may affect your application. If there are, consider whether there is anything you can do to improve the situation since it may help to raise your score (find out more about finance with poor credit here).
What you need to appreciate is that no matter which product you choose, lenders are always looking to minimise the amount of risk they’re accepting. As such, they’ll incorporate into their checks whether you have any past and recent CCJs, Accelerated Payment Notice, any outstanding debt (e.g. credit card debt) and your history of resolving debt on time. If there are any issues, always be upfront since this may help you earn trust. Nevertheless, any adverse issues will still cause lenders to perceive your application as a risk, leading to you being offered a higher interest rate if you are successful.
Do you know what documents you need to submit?
In addition to granting lenders permission to review your credit score, you’ll also need to submit a number of vital documents with your application. As well as proof of your identity, you may need to submit your latest and past bank statements, profit and loss statements, cash flow forecasts, collateral documentation or tax returns. This should be outlined in the documents provided by the lender, as well as the format in which they need to be provided in. Therefore, you should always try to prepare them beforehand since this will help make the application process move quicker and run more smoothly.
Could your business benefit from applying for a Business Loan?
In order to grow and ensure successful day-to-day operations to enable you to gain a larger foothold in your sector, making sure that you have access to sufficient amounts of cash is vital. But if you’re having to work to a tight budget, that can be easier said than done. That’s why more and more business owners are choosing to explore the possibilities available from applying for a Business Loan. The challenge you need to overcome next is sourcing a suitable agreement from a lender you can trust.
At Rangewell, we’re an Access to Finance specialist who’s mapped over 400 lenders to offer you an 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. We offer the support your business needs and our services are free to you. So if you’re looking to raise funds for your business, apply for a Business Loan today or find out more with Rangewell.
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