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A business loan can give a company the money it needs to get started or take its growth plan to the next level. Whether you need a few thousand pounds or a whole bunch more, for a little while or a long time, there are plenty of lenders out there to cater to the full spectrum of what you need.
This means that finding the best business loan is a matter of first understanding your business’ financial circumstances and needs, and then finding the loan or finance option that best meets those needs.
If you need quick funds for your small business, Natwest business loans application takes 10 minutes using your Online Banking details, and if approved, you could have the money within 24 hours. You’ll also pay no setup or application fees, and can borrow up to £50,000
If your business needs ongoing access to funds, Capital on Tap offers flexible line of credit loans for small and medium-sized businesses up to £250,000. Your loan funds can be accessed via your card or bank account, and you can also earn business cashback and rewards via the Capital on Tap premium account. Capital on Tap has recently launched a new feature called “Preloading.” Preloading offers you the chance to top-up your credit limit with your own funds, while still getting cashback on the full purchase price.
If you’d like to get access to a range of loans to find the one that’s best suited to your business, then you might want to consider a business loan broker or “introducer” like Tide. Unlike most brokers, Tide was a direct lender up until recently and now acts as an introducer to many well-established lenders. With Tide’s broker service, businesses could access funding in “as little as 24 hours”, depending on the loan.
This will depend on several factors such as the size of your business and the type and size of the loan you need. Some businesses may want to get a loan with the bank that they already have their business current account with, while others may prefer to get a loan through a specialist business lender.
Some of the banks that offer business loans in the UK include:
There are different types of business loans that work in different ways. What type you opt for can depend, among other things, on what stage your business is at.
Much like an individual, a company has a credit record and credit score. The healthier these are, the easier it will be to secure finance. A new business is obviously not going to have much in the way of a credit history, so a lender will either want to start small or will need some form of security. Loans for launching a new business or for a business which has just launched are often referred to as “start-up” loans. These are typically available over terms of one to five years, and can be government-backed.
More mature businesses have a variety of loan options, thanks to a credit history, a few years of accounts and an established turnover. These are in addition to other types of credit available such as business credit cards or factoring. Let’s take a look at some of the main loan options available in a little more detail.
Business loans can be a good option if you’re looking to borrow a large amount of money over a longer period and at a lower cost than a business credit card. However, this isn’t the most flexible option and it can sometimes be hard to meet the eligibility criteria.
Here are some of the main sorts of loans that are available to SMEs in the UK:
With in mind that companies looking for a start-up loan have been operating for less than 2 years, these loans typically only offer small sums with short terms (typically 1 to 5 years). With little or no accounts to go on, lenders may want to use a personal asset (generally a property) as security for the loan. Government-backed start-up loans are available, offering a fixed, low rate of interest and free mentoring for a set period, in addition to extra security for lenders.
Unlike a start-up loan, small business loan eligibility doesn’t necessarily depend on how long a company has been trading. The company does have to be “small” however, and exactly how small varies from lender to lender. Many require a minimum annual turnover. Small business loans can be secured or unsecured, and more often than not charge interest at a fixed rate over terms up to around 60 months (5 years).
If your industry is prone to seasonal variations, this is one scenario that could lead you to consider a short-term business loan. As you might imagine, these loans come with higher rates than, say, a five-year loan, as lenders will need to make the process worth their while. Alternatives to short-term business loans include a revolving line of credit such as a 0% purchase business credit card, or a decent overdraft facility on a business account, although these options typically come with lower credit limits.
With a business credit card, you can borrow what you want (subject to a credit limit), when you want, so you’ll only pay interest for the days on which you borrow. Subject to a monthly minimum repayment, you can also pay back funds on terms that suit you. Unlike a fixed-term loan, which closes when all the money has been repaid, a credit card is a “revolving line of credit”, which means that the facility is effectively always open (which can be a mixed blessing).
Typically spanning over five years or more, these loans are designed to fund substantial projects that drive company growth. They may involve larger amounts of money to support ambitious ventures. Expect close scrutiny of your business plan, loan security requirements and a longer, more thorough application process.
Revenue-based financing is a type of business lending where you will receive a lump sum of money for a percentage of your business’ revenue. Unlike traditional business loans, your monthly repayments may fluctuate with your revenue stream. So, if you’re having a particularly slow month, you will repay less and your repayment term will be longer.
Peer-to-peer (P2P) loans aim to connect investors with SMEs looking for finance. By cutting out the overheads normally associated with high-street banks, these companies are often able to offer more competitive rates.
Having limited or poor credit history can make it challenging to find a lender who is willing to provide financing for you or your business. However, there are many lenders that provide bad credit business loans, as well as a number of other finance options.
A commercial mortgage is one that is taken out on a property that will be used for business or commercial purposes, and not as a residence. Commercial mortgages can be more complicated than personal mortgages, and you’re likely to need a bigger deposit.
There are two main types of invoice finance: factoring and discounting. Both offer support to businesses with fluctuating turnover due to relying on client invoices for turnover. Invoice finance lets you borrow funds against the value of your unpaid invoices, minus a small fee.
If your business is in need of acquiring an expensive piece of equipment, like a vehicle, machinery, or computer system, asset finance could be an option worth considering. Instead of having to cover the cost upfront, you can pay it off in smaller instalments. Unlike a regular business loan, asset finance is secured against the cost of the asset itself. If you fail to repay the loan, the lender has the ability to take ownership of the asset.
Business cash advances can be useful for small businesses that have inconsistent sales or process most of their sales through card transactions. You can effectively get funds upfront that is then paid off using a percentage of future sales.
Regular cash flow can be a big concern for many businesses, and that is one of the advantages of a business line of credit. Instead of receiving a lump sum upfront like you would on a normal business loan, a line of credit gives you ongoing access to funds to use as you wish. You only pay interest on the amount of credit you use, but will need to repay what you’ve used in order to access the full limit again.
There will be heightened competition and innovation as lenders – in particular non-banks whose traditional markets were disrupted by the pandemic – look to carve out new customer niches in order to remain viable. The competition will be the most fierce for the highest quality businesses, so those customers can expect to have a wider choice of products.”
So what happens if your business is too young or small to qualify for a loan with decent terms? Or maybe it’s just a bad time to take on debt? You still have financing options.
If your business requires additional credit, you also might want to consider taking out a business credit card. Whether you’re running a startup or a large established company, business credit cards offer a range of benefits that can help you better manage your finances.
Business credit cards offer greater control over your cash flow, enabling you to address revenue gaps and freeing up additional capital for reinvestment in your business.You can also use a business card to increase your company’s spending power, better manage your expenses, and even earn business-focused rewards.
Here are some of the key features to consider when comparing business loans:
Choosing a longer repayment term for your business loan can help to reduce your monthly repayments. But lengthening the term also means you’ll pay more in interest overall, so be sure to consider this when picking a loan. ”
Each lender will have its own eligibility criteria. Some common things that are usually on the list include:
Brand | Logo | Overall satisfaction | Customers who’d recommend | Review | Link |
---|---|---|---|---|---|
Lombard | ★★★★★ | 97% | Lombard is a direct lender, not a broker, specialising in asset finance. This allows businesses to access new equipment or unlock the value in existing assets. Lombard won this year’s awards, scoring 4.8 out of 5 stars for overall customer satisfaction and receiving a recommendation score of 97% from its customer in our survey. | Read our review | |
Tide | ★★★★★ | 97% | Tide uses Open Banking to offer business loans aimed at small to medium sized businesses. It was highly commended in this year’s awards, with an overall score of 4.7 out of 5 stars for customer satisfaction and a recommendation score of 97%. | Read our review | |
mycashline | ★★★★★ | 93% | mycashline is a direct lender, not a broker, offering flexible and tailored unsecured loans. It says it aims to level the playing field for small business finance and promote SME growth. The overall customer satisfaction score for mycashline in our survey was 4.7 out of 5 stars. | Read our review | |
Love Finance | ★★★★★ | 91% | Love Finance is a financial company based in Birmingham. It works with a range of lenders with the aim of helping UK businesses find the right type of loan or finance option. Its overall customer satisfaction score was 4.7 out of 5 stars. | Read our review | |
NatWest | ★★★★★ | 97% | NatWest, the established high street bank, offers a wide range of secured and unsecured loans to cater to businesses of all shapes and sizes. Its customers in our survey scored it 4.6 out of 5 stars for overall satisfaction. | Read our review | |
Cubefunder | ★★★★★ | 97% | Cubefunder provides fixed-cost business loans and charges one set fee instead of adding interest, and can design a flexible repayment plan to match your company’s cashflow. It scored 4.6 out of 5 stars for overall customer satisfaction. | Read our review | |
Barclays | ★★★★★ | 95% | Barclays, the well-known bank, offers a range of business finance products, from unsecured loans through to asset finance and commercial mortgages. It received an overall customer satisfaction score of 4.5 out of 5 stars. | Read our review | |
Nest | ★★★★★ | 93% | Nest provides a multi-lender platform to help businesses across the UK find the right loan through its panel of more than 200 lenders. It scored 4.5 out of 5 stars for overall customer satisfaction. | Read our review | |
HSBC | ★★★★★ | 97% | HSBC, the global banking giant, offers a wide range of business financing opportunities for companies of all sizes. It customers in our survey scored it 4.4 out of 5 stars for overall satisfaction. | Read our review | |
Funding Options | ★★★★★ | 97% | Funding Options is a broker that uses innovative technology to match a business’s needs with one of its 120 approved lenders. For overall customer satisfaction, it had a score of 4.3 out of 5 stars. | Read our review | |
Funding Circle | ★★★★★ | 94% | Funding Circle is a business lending service bringing together investors with businesses seeking investment. It recieved a score of 4.3 out of 5 stars for overall customer satisfaction. | Read our review | |
iwoca | ★★★★★ | 82% | iwoca is a direct lender offering fast and flexible credit to small businesses. It says it uses technology to eliminate the cost and complexity associated with traditional business finance. iwoca scored 4.2 out of 5 stars for overall customer satisfaction in this year’s survey. | Read our review |
Response | % of respondents |
---|---|
Very satisfied | 53.25% |
Reasonably satisfied | 37.50% |
Neither satisfied nor dissatisfied | 7.50% |
Moderately dissatisfied | 1.25% |
Highly dissatisfied | 0.50% |
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