A business loan is in every way similar to a personal loan with the only difference being that it’s designed for commercial use.
When you take out a business out, you are given a definite amount of money through a span of time and both the monthly payments and the interest rate are fixed throughout the term of the loan.
While some business loan providers offer easy access to short term loans, some others allow you to borrow over a long period of time. Moreover, there are some providers who specialise in small business loans and some others exclusively concentrate on business loans for startup firms.
Types of business loans
When you mention business loans, this means a broad category and it can refer to different products which might include:
- Unsecured loans
- Secured loans
- Business cash advances
- Revolving lines of credit
Amidst the loan categories mentioned above, you will see that each loan is designed for different situations so that users can use them according to their convenience.
- Fast cash loans
Fast loans for businesses have been designed especially for their speed of approval and these seem to be the most perfect option for people who need immediate cash to buy some business inventory or any other thing. You may even receive the money within an hour of application. How fast you can receive the amount of money will usually depend on how much prepared you are for obtaining the loan. If you’re capable of offering all the documents together, this can always make the difference.
- Business loans lent for a short term
Short term business loans are usually designed for the short-term which have loan terms between 3 months and 2 years. Loans with repayment terms of more than 2 years are considered to be either medium term or long term loans. In case you’re someone who is choosing a loan for a short span of time, you may even consider business overdraft alternatives or revolving credit facilities.
- Business loans for poor credit
If you thought you could never get a business loan with a poor credit, you’re mistaken. Though it becomes more challenging, it is not impossible. If you explore the business lending market, you will be rather surprised to know the various choices that are available for you if you are willing enough to offer personal guarantee or security.
- Small business loans
There are few specific lenders which cater to only small businesses. It has always been extremely challenging to get small business loans from the banks but with the advancements in the field of alternate finance, there are too many viable solutions out there in the market.
Obtaining business loans – Eligibility criteria
With so many different products and lenders in the market, the eligibility criteria of obtaining business loans usually vary from one lender to another. Nevertheless, during a consultation, you can expect to be asked about the following details:
- Bank statements
- Profit and turnover
- Filed accounts
- Trading history
- Turnover vs. loan amount
- Payment history
There are no such hard-and-fast standard criteria for obtaining business loans but the lender will definitely take a look at few factors. Here are few thumb rules you should keep in mind before applying for a business loan.
- The amount of loan should be less than 25% of the total business turnover
- Your business organization has to be profitable
- You should have no outstanding late payments or CCJs
- Trading history should be more than 24 months
- Your business should be located in UK
All these factors will accelerate the process of obtaining business loans from a lender. Make sure you handle repayments on time as missed payments will always adversely impact your business record. Keep alerts and reminders so that you don’t forget to make timely repayments.