What is a business loan?
A business loan is a loan designed to provide cash to businesses rather than individuals. Depending on eligibility, a business can borrow between £1,000 and £3 million, and pay it back over a time period of up to 15 years.
Types of business loan
There are many types of business loan available, and the type of loan that’s right for your business will depend on your requirements. The options to explore include:
Government-backed business loans for startups
Secured business loans
Unsecured business loans
Short-term business loans
Medium to long-term business loans
Peer to peer business loans
Acceptance criteria for a business loan
This will depend on the type of business and the loan option you need. However, lenders will require some form of credit check to be undertaken on both the applicants and the business, so make sure that your business accounts are filed on time. For limited companies, many business loan lenders will require a director's guarantee, a legal guarantee that you will pay back the loan yourself if your business cannot do so. Check out our FAQs to find out more.
Pros and cons of business loans
A benefit of choosing a business loan is that it could provide the cash needed to help your business grow or expand. You will also choose the amount your business needs and how long to make repayments. If you meet the lender criteria and accept your application, the money should be in your business account relatively quickly.
If you are an owner or director, your personal credit history can affect the interest rate you will be able to get - or even if you will be accepted at all. There is also a direct risk to you, and your partners should your business not repay. Or a lender may require an asset or that insurance is taken out against the death of you or other partners to ensure the loan is paid off if needed.
Alternatives to business loans
There are alternatives available, including business credit cards, business overdrafts, government schemes, crowdfunding and funding through investors. It is a good idea to explore all options and risks before applying.