If you’re looking for some additional funding for your small business, then a loan is often the quickest and most straightforward route. That being said, with the choice of business loans available wider than ever, it can be a confusing and sometimes overwhelming decision to know which way to go. We hope this article will help to answer a few of your questions.
Finding what small business loans are available
When you start your search for the right business loan there are a few questions that you should ask yourself first.
How much do you want to borrow?
Generally, the larger the loan, the more difficult it will be to find a lender. By looking to borrow the minimum amount that you need, you are more likely to get a positive lending decision.
Over how long will you pay the loan back?
If you want to pay the loan back over a very short period, then traditional lenders may not always offer the terms you’re looking for. Check the interest rates for different term lengths to ensure that you choose the one that works out best for you.
How fast do you need the money?
Although many lenders now have loan offers which promise that the money will be with you in a matter of hours or days, not all do so the further in advance you can plan, the less likely you are to be disappointed.
Are you prepared to offer security?
Lenders will offer both unsecured and secured loans. A secured loan is where a tangible asset such as a property or vehicle is used as security for the lender so that if you fail to pay back the debt, they can sell the asset to make back their money. It is therefore easier to get a secured loan than an unsecured loan so you must decide if you are prepared to go this route.
Getting a business loan with bad credit
Before applying for a loan it’s a great idea to check your business credit score. This allows you to see what a lender would when they do a credit search on your business.
If you want to check your business score you can do so through My Business Profile. We will also give you help and support in improving your score if it’s lower than you were hoping.
The better your business credit score, the more likely you are to find a loan for your business and to get more favourable interest rates.
If you ARE applying for a loan with bad credit, then be sure that you still compare the different terms available carefully. Your choices will be fewer but may still vary considerably depending on the lender.
You may find that you will need to offer security in the form of a tangible asset in order for a lender to agree to a loan. Make sure that you are happy to take on this risk before agreeing.
The government is keen to support new businesses so they have backed a startup loan scheme which you may qualify for if you’re just starting out. Take a look at the Start Up Loan website for more information.
Getting a business loan without collateral
It may be that you have no tangible assets to offer as security for your loan and so you will need to find an unsecured loan.
Lenders will generally rely more heavily on your credit report where there is no security on offer. It is therefore even more key to ensure that you have checked your business credit score and done what you can to ensure it is as good as possible.
Experian are here to help you with this so don’t forget to take a look at My Business Profile and see what support we can offer.
Are business loans tax deductible?
If you have a business loan, then you can claim any interest as a business expense. You can’t claim the loan payments themselves.
For more information on business expenses, take a look at the Gov.co.uk website.
Is a business loan a good idea?
The answer to this question depends on the circumstances – the reason you want the loan, your current financial position and ability to make your payments.
A loan might not always be the best action to take and it’s always worth considering all other funding options too. However, if you have done your homework, and you believe that a loan is what you need in order to grow your business and that you will be comfortable with the repayments, then there is no reason why a business loan wouldn’t be a great option.