No matter why you are looking for a business loan, there will be a solution which to meet your needs in the current financial market.
The main types of business loan available
The different kinds of loans available need to be assessed to ensure you have the right one for your circumstances and are paying the least for the facility.
One unlikely source for UK entrepreneurs is the government-backed Start Up Loan scheme, which offers unsecured personal loans from £500 to £25,000 to start or grow your business.
Interest
Alternatively, wherever you are looking for secured New Business Loans Northern Ireland and the remainder of the UK boast a variety of providers in the private sector with alternatives to high street banks found at sites such as www.assetfinanceni.com/.
Your principal lender, probably your bank, will offer a variety of options for business loans. The most commonly available is a line of credit or overdraft facility, which can be offered as a loan over a short period to plug any gap in your finances that is impacting on the day-to-day operation of the business. The loan will be subject to interest until the time the arrangement ends. Such arrangements can run on year to year, but the bank will want to see the outstanding debt capital reduced or paid off over the initial period.
Instalment loans, credit cards and balloon loans
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The bank may also offer a fixed-term instalment loan where a monthly instalment will pay off the capital and interest over the period of the loan. Such loans are often subject to guarantees from the company directors.
Your bank may also suggest a corporate credit card to assist the company during moments of crisis. This is a risky option, as it could simply increase the company’s debt. Only take this on if you are confident that you will be able to clear the monthly debt on the card before interest kicks in. This is an option for short-term cash flow issues. One advantage is that it is effectively an unsecured loan.
Some companies may offer balloon loans, where interest is paid off during the loan period and the capital paid at the end. These loans are normally available where a company is guaranteed a payment which will cover the cost of the loan. Occasionally, the agreement will involve interest and capital being settled at the end of the loan period.
Summary
This article outlines loan options available to UK entrepreneurs. It covers the government-backed Start Up Loan scheme, offering unsecured loans from £500 to £25,000, secured loans from private lenders, and bank overdrafts for short-term cash gaps. It covers fixed-term instalment loans backed by guarantees, credit cards as an option, and balloon loans, where interest is paid during the term and capital settled at the end.
Questions this article raises
- What credit score or trading history do you typically need to qualify for the Start Up Loan scheme?
- How does a balloon loan’s total cost compare with a standard fixed-term instalment loan?
- When does a corporate credit card make more sense than an overdraft for short-term cash flow?
