A sum of £15,000 can make a big difference to a growing business, but there are different ways to get your hands on it. This guide will unpack the options available to help you choose appropriate finance for your unique situation.
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Business loan and revolving business credit options
When it comes to borrowing a lump sum upfront for your business, options include (but aren’t limited to):
A startup loan. A government-backed startup loan could be just the trick for new a business. They have term lengths of 1-5 years, you can apply for up to £25,000 and they even come with free mentoring. Your business will need to meet certain criteria including having traded for less than two years.
A standard, fixed-term business loan. With a traditional business loan, you’ll have a £15,000 lump sum transferred to your bank account and make monthly repayments on the balance. Interest rates can be fixed or variable.
A business cash advance. If you’re unsure when you’ll be able to pay back your loan due to fluctuating sales, a business cash advance could be a solution. With this form of business credit, the fee is fixed, meaning you’ll pay back a fixed percentage of your sales until your debt is cleared. If business is booming you’ll clear your debt faster and if business is slow it’ll take longer, but either way, it’ll cost you the same amount.
Asset finance.Asset finance can be a useful way of funding the purchase of equipment for your business, allowing you to spread the cost of assets over a longer period. It’s more expensive than paying outright, but you’ll be able to access the latest equipment without a huge initial outlay.
Asset refinance. This option lets you unlock the capital in assets you already own, by using them as security on a loan.
If you’re looking for ongoing access to business credit, you could consider the following options:
Invoice finance. There are two main types of invoice finance. With invoice discounting, the lender uses your unpaid invoices as collateral for your loan. With invoice factoring, the lender buys your unpaid invoices from you (at less than their full value).
A business credit card. Make purchases up to your pre-arranged credit limit, and repay as much or as little as you can afford, subject to a required minimum monthly repayment. You’ll usually only be charged interest with a business credit card if you don’t pay off your balance in full each month.
A business line of credit. A business line of credit works similarly to a credit card or overdraft: you’ll only pay interest on the amount borrowed, on the days you borrow, and have flexibility over repayments too.
What if I have bad credit?
There are some lenders who specialise in offering business loans in spite of bad credit. However, it could be tough to be approved for sums as large as £15,000 without offering some form of security. If you are approved, you may need to settle for higher interest rates than those available with traditional loans.
For a loan of £15,000, you may be expected to provide security in some form using a business or personal asset as collateral. This is known as a secured loan.
In this case, if you fail to repay the loan, the lender can sell the asset to recoup its losses. This mitigates some of the risk for the lender, improving your chances of being approved for a loan and in some cases meaning better rates.
Secured loans usually take longer to fund, because the lender needs to verify the value of the asset that you put forward.
Lenders may additionally seek to reduce the level of risk they are exposed to by asking you for a personal guarantee. This is a contract which states you’ll be personally responsible for debts that the business is unable to repay. These tend to be compulsory for larger loans, whether secured or unsecured.
How much does it cost to repay a £15,000 business loan?
Interest rate of 5% fixed p.a.
Interest rate of 10% fixed p.a.
Interest rate of 20% fixed p.a.
2 year loan
Monthly: £658.07 Overall: £15,793.70
Monthly: £692.17 Overall: £16,612.17
Monthly: £763.44 Overall: £18,322.49
3 year loan
Monthly: £449.56 Overall: £16,184.28
Monthly: £484.01 Overall: £17,424.28
Monthly: £557.45 Overall: £20,068.34
4 year loan
Monthly: £345.44 Overall: £16,581.09
Monthly: £380.44 Overall: £18,261.06
Monthly: £456.46 Overall: £21,909.86
What about a broker or matching service?
Brokers and matching services can hold your hand through the tricky job of finding the best business finance product for you.
A good matching service can instantly check which lenders would offer you a £15,000 loan, saving you time and stopping you from damaging your credit score via multiple loan applications.
These services usually get a referral fee from the lender you end up choosing, meaning it won’t cost your firm a penny.
The downside? These services rarely have access to the full market. Instead, they’ll refer you to lenders from their panel of partners. That means you’re not guaranteed to be offered the very best deal you’re eligible for.
Frequently asked questions
Eligibility criteria will differ between lenders, but it helps if you can demonstrate a good personal credit score and business credit score. You’ll boost your chances of approval by providing collateral and showing a consistent history of profit.
Yes. There are many lenders that specialise in providing finance for startups. However, the best deals tend to be saved for established businesses.
It varies massively depending on the type of loan and the amount being borrowed. It’s possible to get business loans for 1 year or more than 10 years. However, longer loans are typically only available on larger sums and are harder to be approved for.
Your lender’s biggest concern is your ability to repay the loan. For this reason, it likes to know what you’re spending the money on. If you’re using the loan to try and grow your business, this could benefit your application.
Chris Lilly is a publisher at finder.com. He's a specialist in credit-based products including business and personal loans, mortgages and credit cards, and is passionate about helping UK consumers make informed decisions about their borrowing. In his spare time Chris likes forcing his kids to exercise more.
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