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Business Loans Guide

Apply for a Business Loan

A guide to helping you understand and apply for a business loan online

How to apply for a business loan

When it comes to securing finance for your business, there are a variety of lenders available and a vast number of loan types to choose from. A business loan can be used to cover essential business expenses, which you are unable to presently afford.

It is possible to borrow anything from £1,000 to £20,000,000, with repayment terms typically set to less than a year for smaller amounts to several years for large sums.

The exact amount and terms will be dependent on the loan you are looking for and the available lenders. To help you find the ideal loan for you, we have created this useful guide which will take you through the various steps required to successfully apply for a business loan.

Consider why your business needs to apply for a business loan

The first step in finding the ideal loan for your business is to consider the reasons why your business needs to apply for the additional funds. Do you need short-term finance to improve cash flow, or a long-term loan to fund an investment in the business?

Once you know why you need the loan you will be able to begin your search for a lender which is able to provide the specific form of funding you require.

If you need to improve working capital or short-term cash flow issues, the most suitable forms of lending will be lines of credit, credit cards, overdrafts or invoice financing. These loans can provide flexible access to the finance your business needs, with repayments based on your income levels and the amount you borrow.

Alternatively, if you are looking to cover a large expense a fixed term loan or asset finance could be suitable options. These are ideal for paying for everything from renovations to purchasing new machinery. A long-term loan will usually provide access to a larger amount and can be repaid over several years to suit your income levels.

Compare a range of lenders before applying for a business loan

Before you make a business loan application it is important to compare business loan lenders, as this will ensure you access the most competitive loan available. Our finance finder tool is designed to make this step as quick and easy as possible. The tool will ask you a series of questions, such as how much you need to borrow, what the funds will be spent on and what repayment period you require.

We work with everyone from traditional high street banks and online lenders to alternative peer to peer loan companies. These lenders are all listed within our comparison tool, so instead of wasting essential time manually checking every lenders criteria and loan availability, our tool will do the hard work for you.

We will provide you with a list of available loans which match your needs and the criteria of the lender. The pre-qualification checks asked by the tool will help us to provide you with a list of likely interest rates and terms, so you know exactly what to expect from each lender.

Generally, a lender of a fixed term loan will charge interest as a percentage of the loan balance and in many situations will also charge an origination fee.

Preparation of your financial documents

Each lender will require certain documents as part of their application process, such as details of your monthly turnover, copies of your annual filed accounts and a detailed business plan.

Once you have found a lender which offers the finance you require, take some time to read through their specific requirements. This will save time during the application process and could significantly reduce the time it takes for them to approve your application.

A comprehensive business plan can take some time to complete but is an excellent way of providing the lender with an insight into the business and your plans for the future. You should aim to show that the business can comfortably afford the monthly repayment amounts.

By explaining in detail how you plan to use the loan and the anticipated growth this will provide your business, it can help to alleviate any concerns the lender may have.

The most common reasons why lenders reject loan applications are; a low credit score, a short period of credit history, poor business performance, not enough security to cover the loan, or already owing too much to lenders. When preparing your documents try to consider these reasons, as you may be able to improve your chances of being granted the loan.

If your business does not have a strong financial history or struggles with a poor credit rating, you may need to provide a personal guarantee or security for the loan amount.

A secured business loan will be based on the amount you wish to borrow, with your assets used as collateral if the loan falls into default. By valuing any assets which you are able to provide as security it will help the lender process the application and could improve your chances of being accepted.

Apply for a business loan

The next step is to apply for a business loan, although the exact steps vary between lenders. You will be asked similar questions to those in our finance finder tool and it is likely that you will need to provide the documentation listed above.

Once the application is complete the lender will carry out their internal checks to decide whether you are eligible for a business loan.

If your application is considered high risk, you are likely to be offered a loan with a higher interest rate and a shorter repayment term. The lender will be looking to recoup their funds as quickly as possible, so this will reduce their risk. However, if your business is in a good financial position with an excellent credit rating, you will benefit from a low interest rate loan offer with the potential for a flexible repayment period.

Once you receive your loan offer, you should ensure that you understand the terms and conditions before signing and returning any documents. When you apply for a business loan there may be additional fees and charges for both the arrangement of the finance and the duration of the loan agreement, so it is important that you understand what these could be.

If there is anything which you do not understand, we are always available to discuss the terms so that your business does not suffer from any unexpected costs.

Repay your business loan

Although this step will come after successfully completing your business loan application, you may still need to setup the repayments. In many agreements there will be fixed monthly or even weekly repayments, however loans such as invoice financing or merchant cash advances will depend on your specific income dates.

It may be possible to repay the loan early to reduce interest charges, especially if the lender will not charge penalties for early payment. This could reduce the financial pressure on your business, so that you are free from debt at an earlier date.

If you would like to apply for a business loan, our team can guide you through the process and can help you find the ideal lender. To find out more, please contact us today.

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