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How hard is it to get a small business loan?

Published on 28th August 2018 - Last update on 31st March 2020

The early stages of your business’ development will, no doubt, be one of the most exciting and dynamic periods of trading. But, it also comes with more than its fair share of challenges, which all need to be overcome if you’re to succeed. During this period, the most common issue that SMEs face usually involves finding the right funding opportunities. The traditional route may not always yield results, but there are plenty of alternative pathways available to small businesses. So whether your goal is to acquire new equipment, carry out renovations, hire skilled employees, maintain day-to-day operations or support an existing growth project, qualifying for a Small Business Loan may not be as difficult as you think. That said, you can improve your chances by making sure that you’re well prepared beforehand.

Why do I need the funds and how much is required?

One of the first questions you’ll be asked by any lender is why your business needs funding, and it’s up to you to give a clear and concise answer. Although many Small Business Loans don’t impose any usage restrictions, lenders will feel more reassured once they understand your goals and how you will use their investment. In addition, being clear about your goals will also enable you to create a project management plan, making it easier for you to identify key stages, baselines and the amount of capital that’s required. So whether you’re looking to acquire new equipment, replenish supplies, hire skilled employees, support operating expenses or gain a cash injection, clarifying the needs of your business and showing that you know how to make the most of their investment will create a positive impression.

Looking to raise funds for your small business? Aren’t sure what funding opportunities are available to you? Apply for a Small Business Loan and learn more about how your business could benefit.

Where do I stand financially?

Next, you should consider reviewing both your personal and business credit score using one of the UK’s leading credit agencies: Equifax, Experian or TransUnion. Your report should outline details such as CCJs, missed payments, Accelerated Payment Notices (APN), accounts, existing finance agreements and whether you have a history of resolving debt on time, putting you in a strong position to identify any issues which could be adversely affecting your score. Although your score may not always be a deciding factor, depending on your chosen product, it will affect how much interest your business is charged throughout the agreement. Therefore, taking the time to resolve CCJs, settle outstanding debt and staying within your credit limit can all help improve your score, saving your business money in the long run.

Should I offer lenders collateral?

Naturally, this all depends on the type of Small Business Loan you’re considering. Presenting collateral (unencumbered equipment, machinery, vehicles or property) as part of a Secured agreement can help reinforce lender confidence, which may allow you to borrow more capital and gain a more favourable rate of interest. But, this does involve putting assets at risk of repossession should your business default. Meanwhile, using Unsecured Business Loans don't require you to present collateral. However, this exposes the lender to a greater amount of risk, causing them to impose stricter application requirements and charge more interest as result (though there are some exceptions). As such, it depends on what you value in an agreement. Do you want a lower interest rate or would you prefer to avoid putting any business’ assets at risk?

What Small Business Loans could I apply for?

By choosing to explore alternative pathways, you’ll gain a more in-depth overview of what the UK lending landscape has to offer, which may leave you pleasantly surprised. So, although being a small business with a limited trading history may cut you off from some financial products, the growing prominence of the Alternative Finance industry is also opening up opportunities to you as well. As such, if you’re looking for a Small Business Loan, you could apply for products such as Secured and Unsecured Business Loans, Overdraft Replacement, Invoice Finance and Merchant Cash Advance, to name a few. Therefore, being small doesn’t mean having to deny your business the funds it needs to grow and achieve a sustainable future.

Thinking about applying for a Small Business Loan?

Being a small business owner, the idea of exploring what funding opportunities are available to you can feel intimidating. Nevertheless, it is a vital responsibility that needs to be addressed if you’re to support growth, innovation and sustainability. Yet, although you may have a limited trading history, this needn’t be a problem, providing you know where to look for a small business or new business loan. The Alternative Finance Industry is giving more and more business owner access to the funds they need to achieve their goals and reach a brighter tomorrow. All you need to do is source an appropriate agreement for your business.

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. So if you’re a small business owner who’s looking to raise capital, apply for a Small Business Loan today or find out more with Rangewell.


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David Harrison

David Harrison

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