If you’re considering a business loan, there are a lot of things you need to bear in mind. With a wide range of loans on the market and various products designed for speed, short term, growth projects, and small businesses, it’s hard to know where to start.
There are also so many different lenders on the market including high-street banks, challenger banks, online lenders, and small local specialists – which is why Saffron Financial are here to help!
Different loan types
Some products are designed for speed, so you get the cash as fast as possible. How fast a loan is largely depends on how prepared you are. Lots of lenders require detailed documents such as filed accounts and forecasts, and your ability to get these documents together can make the difference between a couple of days or a couple of weeks.
Short Term Business Loans
Some loans are designed for the short-term, with agreements between 3 months and 2 years. Term loans of more than 2 years would be considered medium or long term. If you’re considering a loan for a very short term, it’s also worth considering Revolving credit Facilities.
Loans For Small Businesses
Some lenders cater for small businesses specifically. Small business loans have historically been challenging from the banks, but with the range of alternative finance available these days, there are may more solutions available out there.
Business Loans For Bad Credit
Its often possible to get a business loan if you have a poor credit rating, although its certainly more challenging to borrow money with bad credit in the back ground. It’s still very much worth exploring and you might be surprised at the choices potentially still available if you’re willing to offer security or a personal guarantee.
Security and Personal Guarantees
Business loans fall into two main categories; Secured Loans and Unsecured Loans. For secured loans, you’ll need some security to offer, while for unsecured loans lenders will normally want a personal guarantee.
What is a Personal Guarantee?
You provide a personal guarantee to a third party creditor, usually the bank or another business lender, you’re agreeing to act as a guarantor for the debt obligations of another party, for example your company. That means that if your company defaults on a loan repayment, you’ve guaranteed that you’ll step up and pay instead.
You can use a variety of assets as security for a Secured Business Loan, including Commercial Property, plant and machinery, vehicles, and stock. Lenders have different criteria for what they’ll accept as assets.
Unsecured Loans, on the other hand, don’t require physical security but will often require a personal guarantee. Normally, lenders will want the guarantor to have good personal net worth and be a UK homeowner, demonstrating affordability.
If you’re interested in a secured loan, you’ll need to think about the security you have available. For unsecured loans, its important to consider the implications of offering a personal guarantee.
If you’re not sure which type of loan is right for you, please contact us directly and we’ll discuss this with you in more detail.