How easy is it to get a business loan in the UK?
In short, it depends. If you have an existing business with assets and several years of accounts, it will be much easier than if you’re starting out, with only a business plan and a P&L. That doesn’t mean it’s a barrier though, if you are just starting out – rather it means you should pay extra attention to your business plan and carry out extensive market research.
Not only will this make it more likely that your loan application will be approved, the time and effort put in will also increase your chances of having a successful business. After all, banks only want to lend to businesses they perceive as financially viable; if they think you’ve got a good chance of making it, and you can back that up with evidence, they’ll have no reason not to give you the loan to get things going or expand.
Reasons to consider a business loan
1. Cashflow. Just because you have assets, doesn’t mean you should liquidate them. Many people think that they only need a loan if they have no money – this isn’t the case at all. A business loan can be very useful if you need cash quickly, for a short period, and are confident you’ll be able to pay it back.
2. Safety. You may have personal savings, but if it’s not absolutely necessary to use them, it’s often advisable not to. You never know what emergencies can happen – either personal or business related – that result in significant expenses (damage to your house, car, business, medical emergencies etc.) and it’s good not to have everything tied up in assets.
3. Value. Business loans can often save you money. Not only might you be eligible for tax relief, they’ll also most often be cheaper than personal loans. As with everything, not all business loans are born equal, so it’s worth researching thoroughly to find the one that suits your needs perfectly. Brokers, who specialise in locating the best lender for your requirements, can often help with that part of the process.
4. Security. Some lenders require collateral, some don’t. Either way, it’s better to put up your business and business assets than your home and personal belongings. If things do unfortunately go wrong, make sure you don’t lose anything you couldn’t live without. Not all lenders do require collateral, so explore what you think best matches your expectations and perceived risks.
5. A new market, new possibilities. The reality of the extent of possibilities within the business banking loans world may not match your perception. It’s no longer essential that you go through the big banks – there are now a number of alternatives, from peer-to-peer lending platforms, to government owned banking institutions. If that all sounds confusing, there are brokers out there, such as Bolton Business Finance, which can help facilitate the process of finding a lender and receiving a loan.