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What is a Business Loan?

Published on 8th August 2018 - Last update on 8th January 2019

Growth, sustainability and competitiveness are all vital elements that define a thriving business. But in order to tip the scales in your favour and gain the confidence to pursue all of your short- and long-term objectives, having sufficient amounts of capital available is something you can’t do without. Yet despite its necessity, many UK businesses are still struggling to acquire the support they need to drive themselves forward, and with momentum. This is both unfortunate and unnecessary, especially with the wide range of finance solutions on offer, including Business Loans. Business Loans are a great way of raising capital for a wide range of purposes but are often misunderstood. So to help you decide whether this would be an appropriate solution for your business and achieve a brighter tomorrow, here’s what you need to know about Business Loans.

How can applying for a Business Loan support my business?

What makes Business Loans such a vital resource for many UK businesses is that they aren’t usually subject to any usage restrictions. This means that you could raise funds in order to support any aspect of your business, including refurbishments, renovations, training, purchasing equipment, installing IT, premises and online security to cash injections. Nevertheless, lenders may still enquire what the loan is for and check whether you have a plan in place discussing how you intend to achieve your goals.

Big plans for your business? Need help raising the necessary funds to make them happen? Apply for a Business Loan or learn more about how your business could benefit.

How much capital can I borrow?

Business Loans are often perceived as a useful way of acquiring a large lump sum. However, the maximum amount of capital you could receive depends on whether you choose to apply for a Secured or Unsecured agreement. With an Unsecured Business Loan, funding can range from £5,000 - £250,000. But, on the other hand, using a Secured Business Loan gives lenders the confidence to offer you anything from £5,000 - £1,000,000. Yet what you need to appreciate is that lenders will also decide how much they’re will provide based on affordability. Therefore, to receive the funds that you require to successfully achieve your goals, must review your current financial situation before placing an application.

What do I need to apply?

If you feel that your business could benefit from a Business Loan, there are 3 key aspects of the application process that you need to be aware of. These are Security, Credit Worthiness and Documentation.

Security

Should you choose to apply for a Secured Business Loan, know that you’ll need to present assets such as equipment, machinery, vehicles or property as collateral. Although this helps to raise lender confidence by reducing the amount of risk they’re accepting, it does, in fact, mean putting your assets at risk of repossession should your business default or fall behind in the Fixed Monthly Repayment scheme. Meanwhile, Unsecured agreements do not require the use of collateral, however, it does expose the lender to a greater amount of risk. As a result, this type of loan can be more difficult to acquire and you may not always be offered the full amount of capital your business requires. This especially true if you possess an adverse credit rating.

However, if you wish to borrow a larger lump sum than what’s being presented, you could overcome this issue by offering lenders a Personal Guarantee.

Credit Worthiness

Before lenders will even consider accepting your application, they will want to know that they stand every chance of earning a return on their investment. Therefore, regardless of whether you’re using a Secured or Unsecured product, your creditworthiness will be always be factored into their decision. As such, they’ll incorporate into their checks whether you have recent or past CCJs, Accelerated Payment Notices, outstanding debt (e.g. credit card debt) and your history of resolving debt on time.

So to improve your chances of being accepted and receiving the amount of capital you require, generate a credit report using one of the UK’s leading credit agencies: Experian, Equifax or Callcredit. Once you have one, check whether there are any issues that you can resolve. If you can, it may improve your credit score and allow your business to earn a more favourable interest rate, saving you money in the long run.

Documentation

Finally, in order to form a clearer understanding of your business’ operations and financial situation, you’ll also be required to provide lenders with a variety of essential documents. Although this should be outlined in the documents you’ll receive from the lender, they’ll often ask for a combination of proof of identity documents, past and recent bank statements, profit and loss statements, cash flow forecasts, turnover reports, collateral documentation and tax returns. Therefore, to ensure the application process runs as smoothly possible, get all of the necessary documents ready beforehand and check what format they need to be submitted in.

Could your business benefit from a Business Loan?

At every stage in your business’ development, you’re going to need access to sufficient amounts of capital tO enable you to continue your journey. However, this isn’t easy to achieve and is an aspect that could either make or break your business. But if you’ve got a vision for your business that you’re passionate about realising, there are plenty of funding opportunities available that could help, including Business Loans. But with so many different finance solutions available, speaking with a qualified business finance professional could prove invaluable in sourcing an appropriate agreement for your business.

At Rangewell, we’re an Access to Finance specialist who has 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're with you every step of the way, making applying for business finance transparent and hassle-free. 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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David Harrison

David Harrison

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