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Comparison of lenders
Secured business loans and personal guarantees
For larger sums like £50,000, lenders may look to secure the loan against a business or personal asset, such as property or equipment. Much like a mortgage, if you fail to repay your loan, the lender can sell the asset to recoup any losses.
Realistically, a secured loan can take a little longer to fund because the lender will need to verify the value of the asset that you put forward. The benefit is that having security can mitigate some of the risk for a lender, which can mean better rates. However if you or your business have bad credit, then putting up some collateral as security might be the only way to get approved.
An unsecured loan doesn’t require you to put anything forward as collateral, but you’ll probably need good credit, healthy growth and a number of years of successfully trading under your belt – especially to get a decent rate. Not needing security generally means a faster turnaround – potentially even the same day.
You may also be asked to provide a personal guarantee – which is where a director makes a legal promise to be personally responsible for a loan in the event that the business fails to repay. Under this sort of agreement, you’ll be putting your personal finances on the line, but many lenders will insist on it.
For a £50,000 business loan, you’ll usually (but not always) have to either secure it against business assets or sign a personal guarantee.
What are my options? Lump sums vs revolving credit
If you’re looking for a lump sum to be paid upfront, then options include the following:
- A government-backed Start Up loan. If you’ve been trading for less than 2 years, you can apply for a Start Up loan of up to £25,000. What’s more, multiple partners in the same business can apply – so two successful applications for the full amount would allow your company to access £50,000 of funding. Start Up loans are unsecured and come with an extremely competitive fixed interest rate of 6%.Check your eligibility for a Start Up loan
- A standard business loan. Provided by both high street banks and a plethora of online lenders, traditional business loans with come with a rate that’s tailored to your business. You’ll have a lump sum transferred into your bank account and make monthly repayments on the balance.Check your eligibility for a business loan
- A business cash advance. Not sure when you’ll be able to pay back your loan because of fluctuating sales? A business cash advance could be a solution. With this form of business credit, you’ll agree to a fixed fee upon taking out the loan. Then, you’ll pay back a fixed percentage of every transaction until your debt is cleared. If business is booming, you’ll clear your debt faster, and if business is slow, it’ll take longer. Either way, it’ll cost the same amount.
- Asset finance. With asset finance, you can spread the cost of assets for your business over a longer period. It’s more expensive than paying outright, but it could be a good way of accessing the latest equipment without a huge initial outlay. The assets can be repossessed if you stop making repayments.Check your eligibility for asset finance
If you’re looking for ongoing access to business credit, consider the following options:
- Invoice finance. There are two main types of invoice finance: invoice discounting and invoice factoring. With invoice discounting, the lender will use your unpaid invoices as collateral for your loan. With invoice factoring, the lender will buy your unpaid invoices from you (at less than their full value).
If you need the lump sum upfront, but still like the idea of ongoing, flexible credit, consider these options:
- Business credit card. A business credit card will allow you to make purchases and overspend by your agreed credit limit. If you don’t repay your balance in full before the end of the month, you’ll be charged interest.
- Business line of credit. A line of credit works similarly to a credit card or overdraft, as you’ll be given a credit limit and only pay interest on the amount borrowed. While the rates might be higher than those associated with a more traditional business loan, there’s more flexibility: subject to agreed limits, you only borrow what you need, when you need it, and you repay when it suits you.
A business overdraft is another flexible line of credit that you may wish to consider, but it won’t typically be available for large sums (like £50k), and although it’s super-flexible, it’s usually a very expensive method of borrowing.
How much are payments on a £50,000 business loan?
5% p.a. interest | 10% p.a. interest | 20% p.a. interest | |
---|---|---|---|
1-year term | £4,280 | £4,396 | £4,752 |
3-year term | £1,499 | £1,613 | £1,988 |
5-year term | £944 | £1,062 | £1,468 |
How much does a £50,000 business loan cost overall?
5% p.a. interest | 10% p.a. interest | 20% p.a. interest | |
---|---|---|---|
1-year term | £51,364 | £52,750 | £57,027 |
3-year term | £53,948 | £58,081 | £71,568 |
5-year term | £56,614 | £63,741 | £88,054 |
£50,000 business loan calculator
Interest rate
Loan term
Fees
Your loan would cost around £ each month and £ overall.
What about a broker/matching service?
Brokers and matching services come with some handy advantages – not least the “hand-holding” element that’s so useful when navigating a tricky subject like business finance.
A good matching service will be able to instantly check which lenders would offer you a £50,000 loan, saving you valuable time and stopping you from damaging your credit score via multiple loan applications.
Brokers and matching services will usually get a referral fee from the lender you end up taking out a loan with, so the service doesn’t have to cost your firm a penny.
The downside? These services rarely have access to the full market, but will instead refer you to lenders from their panel of partners. That means you may not be offered the very best deal you’re eligible for.
Frequently asked questions
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