Which is the best business loan?

Which is the best business loan?

Looking for the cheapest business loan? we can help, we work with a range of loan provider to make sure the right solution fits your needs.

What is a business loan?

A business loan is a way for businesses to access funds. Most business loans will allow you to choose how much you would like to borrow and what period of time you would like to pay it back over. Lenders will then charge the business interest on the loan.

What types of business loan are available?

Generally, there are two types of business loan, secured and unsecured.

• Unsecured – this type of business loan generally has a higher interest rate than a secured loan, as there is no business asset used as collateral. This means that business owners have to pay back the loan in the event of the business being unable to pay it back.
• Secured – this type of business loan uses a business asset as collateral, meaning that if the business cannot repay the loan, the asset is used to pay it back. This type of business loan generally has a lower interest rate than an unsecured loan because of the lender is guaranteed to have the loan repaid.

Can I apply for a business loan?

A business loan may offer a quick solution to cashflow issues or business expenses, however, there is generally eligibility criteria you must meet before being accepted for a business loan:

• Some providers will only lend to limited companies, so this is something that you will need to check before applying.
• There may be a minimum turnover criteria applied by some providers.
• Your business may also need to be VAT registered, although this isn’t always the case.

Each lender will apply their own eligibility criteria, so it is important to check this before making an application. Providers will also need you to demonstrate the following:

• Your business is based in the UK
• You have a good credit rating and no outstanding payments of CCJs
• That you can afford to repay the loan.

How does a business loan work?

The business loan you receive will have an interest rate and a repayment period. The repayment period is the amount of time your business will have to pay back the original loan plus the interest. Some providers may charge you for repaying the loan early, so if you think this may be a possibility, it is a good idea to check if there are early repayment charges.

The interest rate that will be applied to your business loan will depend on many factors. One of the main factors is how risky the provider believes your business to be. For example, if you are willing to use a business asset to secure the loan and whether both you and your business have a good credit rating, then you are likely to receive a better interest rate on the loan than someone who has a poor credit rating or is unable to provide a business asset as security.

Once your business loan has been agreed and paid, you will pay back the loan plus the interest at agreed intervals from your business account.

What is the difference between a personal loan and a business loan?

As the name suggests, business loans cannot be used for anything other than business purposes such as funding expansion. A personal loan on the other hand can only be used for personal purposes and will usually stipulate that the loan should not be used to fund your business.

Things to consider before taking out a business loan

There are many things to consider before taking out a business loan, such as:

• The term of the loan – what period of time would you like to repay the loan over or what period of time means that the repayments will be affordable to your business.
• How your business loan will be utilised – this is important as the loan must be used for business purposes, so it is important to have a plan in place for the use of the loan before it arrives to ensure that it is used for its intended purpose.
• If there are any early repayment charges – if you think there may be a chance that your business will be in the position to pay back the loan earlier than intended, it is a good idea to check if your provider will apply early repayment charges as these can be costly.
• The interest rate – shopping around for the best interest rate is important as it could save you hundreds or thousands of pounds in the long run.

Woodward Financials were awarded best wealth management firm in 2021 and again in 2022 who have a team of advisers ready to help you answer these questions and guide you through the right business loan for you.

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