Business Loans
Something’s out there..
The world of business is a different ball game when it comes to finance. Whether you’re running your own small company, or are just a sole trader struggling to make ends meet, you might want a loan to develop your business or to tide you over a rough patch of cash-flow. Whatever you want, the options are out there…
Flexibility
Business loans tend to deal with much larger sums than personal or other secured loans. Even for relatively small businesses the directors can have sums up to £1,000,000 made available to them and because it’s business, there are many ways to make repayments.
A certain type of business
Pubs and guest houses will often require funds to either buy a leasehold from a brewery or to refurbish and upgrade accommodation. A make-over of a good quality guest house or hotel won’t be cheap! These types of businesses can easily provide evidence of their ability to repay loans as they not only have regular trade and turnover but crucially their businesses revolve around a property. Property is always good news as far as lenders are concerned!
Other lenders may choose to be flexible in their approach to a business’s financing needs. They may offer interest calculated on a daily basis, they may offer interest-only loans so the repayments are lower, (although the borrower would have to finance a way of building up a sum to repay the loan at its maturity.) The lender may choose to defer payments for a few years, which might prove particularly useful if the loan was to increase business profits in the short term, because then the business could self-fund its loan.
Often these lenders also allow the businesses to choose when and how they want to start drawing on the loan. For example, they may stagger drawing on it until they actually need it; so over a period of, say three years, the business might gradually build up its loan amount. In these instances the business would have to pay a set up fee. Then they have the knowledge that the funds are there when needed.
Small Firms Guarantee
The DTI run a system geared towards supporting the small business in its expansion plans. Often small business lack security or suitably sustained business plans and experience to qualify for the development funding they need. This is where the Small Firms Guarantee system comes in. The DTI and its lenders developed the scheme which examines the business proposition and if they deem it acceptable, they then act as guarantor for loans of up to 75% of the total amount.
In return for this support from the Government you do of course have to pay a premium to them. However, many companies would be stranded without this sort of direct financial assistance.
As though you needed them
Applying for a loan for a business is a somewhat trickier affair than just deciding what car to buy and asking for that much dosh. You have to be very careful to ask for just the right amount. Make sure you do your homework and calculate all your costs - too little and you might have to go back to ask for more - which won’t go down well and you could find all your plans sunk before you had a chance to really get going. Too much and you could be paying a high price each month.
The million dollar question
Funnily enough in business it’s not always the amount that is difficult to raise. It has been said that it’s only difficult to get a business loan for under £1,000,000!
Warning
Remember, if the loan you are pursuing needs security, then using your house as security for a business loan is not a small step. Consult other members of your family before committing their home to the loan.
Where for art thou?
There are a number of different places to find loans and investment opportunities, including private individuals, other companies, venture capital funds, local authorities and even charities. So look hard at all the options before you go wooing the bank manager.
