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.
If you’re looking for a lump sum to be paid upfront, then options include the following:
If you’re looking for ongoing access to business credit, consider the following options:
If you need the lump sum upfront, but still like the idea of ongoing, flexible credit, consider these options:
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.
| 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 |
| 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 |
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.
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