Applying for a Business Loan – An Expert Guide - Image

Applying for a Business Loan – An Expert Guide

Ever since the 2008-09 recession, some firms have shied away from attempting to access business loans due to high street banks’ purported hesitance to offer them to all but the most creditworthy candidates. Yet there are plenty of loan options available to your company today depending on its scope, industry and ambitions, with secured and unsecured business loans amongst the most popular depending on your current asset portfolio.

This guide will showcase how to approach applications specifically for unsecured business loans, including eligibility criteria, documentation and security requirements, interest rates and further key points to consider.

How to get an Unsecured Business Loan

The process of accessing this facility is in theory a relatively simple one: you select a funder suitable to your sector and requirements, after which they’ll request a series of documents about your business to qualify your eligibility. Depending on the speed of your response with the completed documents, then – if both parties are content – you’ll finalize details such as the length of the loan term, repayment instalments and rates with the funder before starting to receive advances.

It’s important, however, to keep in mind the eligibility criteria involved with business loans for any applications. Be it a mainstream, challenger bank or indeed a specialist financier, in most cases you should expect to provide details on turnover and profit, credit rating, bank statements as well as your trading and payment history. Gathering these details from your business will in turn enable the funder to assess the degree of risk involved with offering your chosen loan and how the arrangement might progress down the line, which can affect the rates they offer as we’ll discuss later in this article.

Assets and Security for a Loan

For SMEs still finding their feet within their chosen sector and market(s), unsecured business loans frequently prove one of the most attractive funding solutions given the lack of assets needed to act as collateral in this arrangement.

While the absence of assets held as security here can appear liberating when contrasted with a secured business loan, those companies considering an unsecured loan should also remember that most funders will ask for a personal guarantee in place of assets. This term refers to a director or high-ranking company executive assuring the funder that should their business fail to fulfil its repayment instalment(s) for whatever reason, then they’re willing and able to honour this commitment. As such, any firms interested in business start-up loans should consider whether they’re capable of offering such a guarantee right now, and perhaps contemplate alternative finance options if not.

Business Loan Rates

Probably the most common query associated with business loans is what rates the companies utilizing them should expect to pay in the process. Whenever you approach a funder to inquire about their loan offerings, they’ll provide an annual percentage rate (APR) which depicts the cost of borrowing over a year period and incorporates an interest rate – often tied to the Bank of England’s Base Rate, and any other charges such as an annual fee.

APRs may vary between different funders as it essentially depends on their risk assessment and calculated likelihood of the loan being paid back successfully. Note, some funders offer a fixed or variable APR – the former involves a fixed monthly fee over the course of your loan term while the latter can shift in line with bank rates and other market factors.

Potential uses of Business Startup Loans

Unlike other cashflow solutions such as trade finance and import / export finance for example, which are arguably more suited to certain industries and business models, the potential applications of business loans are vast, whether you’re a start-up business or have years of industry experience generating revenue in the millions. Below are some examples of how an unsecured business loan could benefit your firm over the rest of this fiscal year below…

  • Expand your services or product lines – With customers’ needs for specialized products becoming increasingly notable by the year, achieving this goal may prove taxing for some businesses requiring the funds to do so, but utilizing a business loan could provide the advance funds needed to ensure that such investments don’t cripple your working capital allocation or other projects.
  • New equipment, machinery or tech – Speaking of projects, each fiscal year brings its fair share of new opportunities for SMEs and large-scale businesses alike. Different projects require different capabilities; business loans can also become invaluable in this regard as firms no longer need to worry about whether they’ll need to lease this equipment or wait until a later date when the funds accrue naturally from their ongoing works.
  • Launch a recruitment campaign – Naturally once you’ve submitted competitive bids and acquired more work(s) in the process, the next step will be to ensure that your business has enough staff to manage both current and upcoming projects without risking contractor disputes. If not, then an unsecured business loan serves the additional purpose of providing the funds needed to run a promotional campaign in search of new talent, often in collaboration with dedicated recruitment firms.

Choosing The Right Business Startup Loan For You

We hope that you’ve found this article a useful starting point in terms of learning more about how to apply for a business loan and what’s involved.

If you are considering your eligibility or trying to find the most suitable loan arrangement for your business, there’s plenty of additional expert information available across our website, including our unsecured business loans product page and business loan FAQs. Touch Financial’s team of consultants have built a comprehensive knowledge of businesses whose scope, sector and credit scores vary considerably. As such, our expertise combined with our proprietary tools enable us to identify funders from our approved panel which specifically fit with your requirements.

Should you have any further queries or if you want to take the next step in pursuing an unsecured loan or alternative business finance options, then get in touch today and one of our expert team of consultants will be more than happy to help.

Apply now and one of our consultants will help to find you the best invoice finance facility for your business, free of charge.

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