HomeCommercial FinanceHow to get a business loan

How to get a business loan


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HomeCommercial FinanceHow to get a business loan

How to get a business loan

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Last reviewed on 13th January 2022

Business loans can be great for releasing capital when cash flow is tight. Although there are multiple lenders offering business loans, it’s still crucial to get your application right from the very start. Business loan lenders tend to be very strict, so even a slight discrepancy within an application could result in you being declined.

Lenders for mortgages and even personal loans tend to offer greater flexibility when compared to lenders for business loans. As a result, the application process is also a lot more thorough. Lenders need to know all the ins and outs of the business applying, so they can be sure that their loan is likely to be repaid.

There’s a large variety of company loans available on the market which are each tailored for specific needs. This article will run through the different types of loans available and an advisor can also help if you get stuck at any point.

Our experts have a wealth of experience in providing advice on business finance. Whether you’re a small shop or an enterprise, our advisors can help. You can make an enquiry below to get started.

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How to apply for a business loan

Each lender has its own criteria when making assessments on business loan applications. That said, the majority of lenders will require the basic information of your business. This can include details such as the revenue generated, debts and so on.  The business will also need to have filed accounts for at least one year.

Lenders will usually request the below:

  • Business assets
  • Nature of the business
  • Director information (other businesses/financial interests)
  • A clean credit file (not all lenders)
  • The net profit generated per annum (balance sheets)
  • Annual accounts/tax returns (minimum one year)
  • The reason for the business loan
  • Outstanding business debt
  • The loan amount required
  • How the business loan will be repaid
  • Business plan (not all lenders)

As all lenders differ, some may offer more flexibility than others. Nonetheless, if you have the above points to hand, it can make your application a lot smoother from the start.

What type of business loan should I apply for?

The type of loan required will depend on the amount and purpose of the loan. The speed in which you need your loan will also play a huge part in deciding which business loan is right for you.

Ultimately, a company loan will either be secured or unsecured. Secured loans are typically secured against assets such as stock or property. On the other hand, unsecured loans aren’t secured against anything.

Some lenders will insist on a personal guarantee before an unsecured loan is taken out. Applicants will also have to show financial proof that their personal guarantee is credible.  Both loans pose a risk, whether secured or unsecured, so be sure that you have a financial plan in case things go wrong.

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What rates can I expect?

Rates for business loans depend on the duration of the loan and also the loan type. For instance, unsecured loans tend to have higher interest rates and fees when compared to secured loans. The reason for this is because lenders have more security on a secured loan in comparison to an unsecured loan.

The duration of a business loan can also affect the rates that you’re offered. A loan has to be worthwhile to a lender, so a loan with a shorter duration may only be offered with higher interest rates. Loans that may span for at least 12 months may be offered with slightly better interest rates. Nonetheless, loans with longer durations will mean that interest is paid over a longer term. This can often result in paying more interest overall.

Your credit score will also play a part in the rates that are offered. Having a good credit score will lead to the best possible rates, subject to meeting the rest of the criteria. Applying for a business loan with bad credit may result in higher interest rates applied. Typically, interest rates can start at 5% and can go as high as 20%. Interest rates may exceed this if your credit is particularly bad.

Every product is different in design and trying to find the best loan yourself is far from simple. Our advisors can first establish the type of loan that will be correct for you based on your business needs. Our specialists can then pinpoint the most competitive rates nationwide, ensuring you’re not overpaying.

Lenders for business loans

The majority of lenders offering business loans offer similar rates to each other. That doesn’t mean to say that it’s good practice to apply to multiple lenders without thought. Applying to the most suitable lender is crucial for many reasons, such as:

  • Is the loan type suitable for my business?
  • Will the loan term offer me enough time to repay the loan?
  • Will I pass the lender’s assessment?
  • Do I have the best possible interest rate?
  • Am I overpaying in lender fees or can they be avoided?
  • Do I meet the lender’s criteria?

The main difference in lenders is their outlook on how an application is assessed. The most suitable lender for a company will be based on the business itself and the nature of the loan required. This is where the expertise of a knowledgeable advisor can be so important.

Brokers for business loans

One thing companies have in common is that employees are best positioned for their skills and strengths. Having a specialist advisor on your team is no different.

Our whole of market advisors can discuss your plans in detail to find you the best possible loan available. Getting your application perfect in the first instance is crucial in saving both time and money. Failed applications can lead to unwanted footprints on your credit file and multiple applications don’t fare well with lenders.

You can make an enquiry on the form below and an expert will call you straight back. You can also call us on 0800 195 0490 to speak to a specialist.


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About the author

Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.