A business loan can be a great asset to expand your growth or cover any unexpected expenses. However, there are different types of loans.
If you’re uncertain about the type of loan you need, don’t worry. We here at Sunny Loans UK are here to help you understand how business loans work.
What Is A Business Loan?
Business loans are a type of borrowing for commercial businesses instead of one person.
There are business loans for start-ups, and there are those for older businesses.
All business loans have different conditions, so you need to do your own research before you apply.
Once you apply, you’ll need to repay the amount you own in monthly instalments including interest on top.
Secured And Unsecured Business Loans
There are two types of loans: secured and unsecured. Secured loans are when a business borrows money and will use an asset as security.
If you can’t repay your loan, then the asset will be sold. However, an unsecured loan doesn’t require an asset.
Assets used to secure a business loan often include property, equipment, or land that you or your business owns.
If you fail to make your payments, the lender can sell the asset to ensure they have the funds they have lost.
These loans have different requirements, and depending on where you get your loan, an unsecured loan could allow you to borrow up to £100,000 with certain banks.
However, secured business loans are more suitable for larger businesses and for those who want to borrow more.
How To Decide Which Business Loan To Apply For
Before you apply for your business loan, we at Sunny Loans UK recommend you research what you need first.
Every business has different needs, and you also need to consider how your business has been performing.
You need to know if you can afford to pay back your loan along with all of your other business expenses.
Not all loans are suitable for all businesses. If you’re starting a new business, a start-up loan could be a better choice for you.
There are many ways to get a start-up loan, and even the government offers an unsecured personal loan to help you start up, so long as you have passed a credit check.
However, there are other businesses that may be eligible for a cash advance business loan if your business generates a specific revenue through card payments.
Researching a business loan is similar to how you would find the right personal loan. It’s all about the money you want to borrow, and how long you want to borrow for.
Comparing the interest rates is best, especially if you plan to take out a long-term loan, so it’s essential you find one that is more financially viable for your business.
Finding The Right Business Loan
When you’re looking for the right business loan for you, there are a few important factors you’ll need to keep in mind.
First and foremost, you need to find a loan you are eligible for, and you should keep an eye on the requirements before you apply.
We also suggest you pay attention to the interest rates, and whether they are fixed or variable.
Not everyone is offered the same interest rate, and if there is a representative APR offered to a percentage of applicants, then not all applicants are eligible.
It is always better to research the interest rates first before you apply.
If your business struggles at any point, we also suggest finding one that offers a repayment holiday.
While this will mean you may accumulate more interest or may mean it takes longer to pay, this is often preferable if you need it.
Also, importantly, we recommend seeing if you will be charged an early repayment fee if you want to pay back your loan earlier than agreed.
How To Apply For A Business Loan
Now that you’ve found the right business loan for you, it’s time to begin the application process.
We here at Sunny Loans UK understand how difficult it can be to apply for loans, so here’s what you need to apply for your loan.
When you apply for a loan, you need to be clear about what you want from the loan. How much money do you want to borrow?
How long will you be borrowing the money? Why are you applying for a loan? How much can you repay each month? How long will you need to repay your loan?
Not only will they ask you these questions, but many lenders will check your business’s credit score too.
If you want a good term, it’s best that your business has a good credit score.
Improving Your Business’s Credit Score
If you want to improve your credit score before you apply, we have a few tips available to help you.
To ensure that you have a good credit score, you should always pay your bills on time, and always have enough money in your account to cover any payments.
If you need to apply for credit, you should only do this when you need it.
If you make too many credit applications, lenders may look unfavourably at you as it could mean that your business is struggling.
The best way to keep up with a good credit score is by keeping a record of your credit report, and keeping all of your details up to date.
It is always a good idea to keep a good record of your business accounts or bank statements.
Many lenders will require proof of address, and will also appreciate a business plan to ensure they are lending a loan to the right person.
We here at Sunny Loans UK understand how difficult it can be to find the right business loan for you.
However, that doesn’t mean it’s impossible. With our help, you should know everything you need to know so you understand how you can get a business loan.