How to apply for a Business Loan

By David Harrison
Content writer
Last update: 31 March 20201 minute read
How to apply for a Business Loan

Table of Contents

Whether you’re a younger SME or a more established enterprise, many UK-based businesses often rely on business loans to gain access to the funds they need for a wide range of purposes. These commonly include growth, debt financing and even refurbishing premises. Yet, despite business loans having been part of the UK lending landscape for a very long time, many business owners still don’t know how they work or how to apply for one, which could be depriving them of an invaluable source of funding. However, it doesn’t need to be this way. If your business needs access to a cash injection for any purpose, applying for a business loan could open the gateway towards a more prosperous future.

Why do I need a Business Loan and how much should I borrow?

Before anything else, the first step to take involves identifying what areas of your business need funding and what your desired outcomes are. Are you looking to support a long-awaited growth project? Obtain new equipment? Provide training opportunities? Raise your bottom line? Or, do you need capital following a previous financial commitment? Whatever it may be, once you’ve pinned it down, you can then think about how much capital you need to ensure it’s achieved successfully. However, you should also give your business some breathing space too, in case of any unexpected challenges. Just remember not to borrow more than what’s necessary since this can lead to you paying out more money in the long run.

Looking to raise funds in order to support growth, innovation or sustainability? Need access to additional capital? Apply for a Business Loan and learn more about how your business could benefit

Do I have a detailed business plan?

Creating a business plan is essential in order to co-ordinate the efforts of you and your team, guiding you towards specific objectives. However, it’s also a task that many lenders will expect you to have completed beforehand. Without one, you can’t be certain about how much capital you need to borrow and the time frame in which your business can repay it by, let alone whether you can safely afford it. As such, although it takes time and effort, lenders will expect you to clearly outline:

  • Detailed research and reporting in regrards to the sector you’re operating in
  • A statement discussing your experience and those of any associated directors
  • What assets are you’re willing to provide as collateral along with relevant documentation
  • Growth strategy
  • Operation plans
  • Descriptions of products and services
  • Competition analysis
  • Financial assessments
  • Cashflow forecasts

Where does my business stand financially?

When applying for a business loan, lenders will always want to check where both you and your business stand financially, which will enable them to assess whether you can safely afford the agreementor not. To that end, lenders will usually request permission to review your credit profile. So if you’re considering applying for a business loan, you need to understnad that lenders will incorporate into their checks everything from:

  • Recent and past County Court Judgements (CCJs)
  • Accelerated Payment Notices (APNs) from HMRC
  • Outstanding debts (e.g. credit card debt)
  • A reliable history paying off debt on time
  • Any financial associations
  • Whether you’ve been a victim of fraud
  • How many credit accounts you have
  • How many addresses you’re linked with
  • To how many names you go by

All of this information helps lenders to gain a more insightful understanding of your current situation, enabling them to identify the risks that are involved and decide whether to offer you an agreement. As such, the weaker your score, the more interest you’ll be charged throughout the agreement, and vice versa.

Therefore, before applying, you should always generate a report using one of the UK’s leading credit agencies: Experian, Equifax or TransUnion. Once you have one, inspect its contents and check whether there are any areas of concern that may be having a negative effect on your score, whilst considering what you can do to improve the situation. You should also look out for any discrepancies, such as misspelled addresses, since they too can prove problematic. Should you identify any issues that are logged in error, you need to get contact the relevant credit agency and provide sufficient proof that their report is incorrect.

What type of business loan should I consider?

If you’re thinking about applying for a business loan, there are two types of agreements available: Secured and Unsecured.

Secured Business Loans

If your business possesses unencumbered assets such as equipment, machinery, vehicles or property, you could use them to provide security for Secured Business Loans. Using a Secured Business Loan could allow you to borrow anywhere between £5,000 - £1,000,000, which is gradually repaid using a Fixed Monthly Repayment scheme, plus interest. Because it requires the use of collateral, it could enable you to borrow a larger lump sum and gain a more favourable interest rate (compared with unsecured agreements), but does mean putting your asset/s at risk. So if your business defaults for any reason, lenders will gain the right to repossess these assets.

Unsecured Business Loans

Unsecured Business Loans don’t require the use of collateral and may allow your business to borrow anything from £5,000 - £250,000, which, again, is repaid using a Fixed Monthly Rate plus interest. Since this means that the lender is exposing themselves to a greater amount of risk (should they approve your application), you may incur a higher interest rate as a result.

Could your business benefit from applying for a business loan?

At every stage in your business’ development, being able to gain access to sufficient funding opportunities is vital for ensuring the success of your vision. However, raising the funds you require isn’t always easy and can often be a frustrating process. Yet rather than depleting your cash reserves or abandoning your goals, applying for a Business Loan could hold the keys to brighter tomorrow. The challenge is sourcing an appropriate agreement from a reliable lender. Fortunately, help is at hand.

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 looking to raise capital for your business’ development and future success, apply for a Business Loan today or find out more with Rangewell.

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