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Compare Business Loans

Most businesses require funding, be it for start-up capital, re-financing, expansion or to cover short-term issues like cash-flow. But what are business loans? A business loan definition is borrowing for business purposes, with the debt repaid over a set period, with added interest.

Time Scales Rates Amounts More Info


iwoca

1- 12 months. Interest charged per day and no fees for paying back the loan early. From 2% per month. Representative example: Borrow £10,000 for 12 months at 49% representative APR. Interest rate of 40% p.a. (fixed). Total amount repayable is £12,165. Actual rate may vary based on circumstances. Get approved for up to £200,000 today. No fees, no commitments. Visit iwoca

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Market Invoice
12 months From 2.1% per month Unsecured business loan up to £100,000. More Info

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Funding Circle
6 months – 5 yrs Rates from 3% per year Unsecured loans
£5k – £500k
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Aldermore
12 month term; no charges for early repayment. Rates from 6.4% per year Up to £100,000 More Info

Rate Setter
3-5 years Rates from 5.8% per year Fast Funding from £10K to £150K
Tailored Funding from £151K to £500K
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Zopa
1-5 years From 9.9% per year £1,000 to £25,000 More Info

What is a business loan and where can you get one?

Many institutions offer small business loans, but in most cases, people will go to the High Street banks.

However, there is a new breed of business lender. Peer-2-peer business loans make accessing capital for businesses a lot easier and faster. Funding Circle for instance that has £2.5bn of SME loans under management and are in the process of listing on the LSE.

 Types of business loans in banks

The array of financing products can be confusing, but the business owner should first consider if they need short, medium or long-term finance, then plan accordingly. Here are some business loan examples.

  1. Short-term business loans

Would include an overdraft facility, perfect if you’re waiting on invoice payments. You could also use bridging finance for capital while you wait for cheques to clear or for longer-term finance.

  1. Medium-term business loans

Standard business term loans, with fixed or variable interest rates, usually up to seven years. These are ideal for property or equipment expansion.

Leasing and asset finance, where the lender purchases new equipment, and you effectively lease it from them for a set period.

  1. Long-term business loans

Apply for a commercial mortgage for larger loans up to 15 years. It’s ideal for a business property purchase.

Meanwhile, fixed asset loans can be taken out against expensive pieces of equipment, repayable up to ten years.

How much can you borrow with a business loan?

Factors include security for the lender and the performance and credit history of the business. Most lenders have an online business loan calculator so you can get a rough guide.

Compare business loan amounts here

Business loan advantages and disadvantages

Sensible business funding is an important part of financial planning. It allows for growth opportunities and convenience but does saddle the business with debt, which has to be repaid, affecting your cash-flow.

Your business is also in danger if you default.

How to get a business loan

It’s simplest to approach your bank, especially if you have a good working relationship already. Otherwise, there are numerous places online specialising in business finance.

Quick Peer 2 Peer Business Loan Provider Reviews

Even more non-traditional are peer-2-peer business loans. Peer-2-peer loans are made from a pool of investors rather than a single institution like a bank. Here we look at peer to peer business loans, and pick out three of the most tempting on the market:

Funding Circle

Funding Circle has hit upon a great way of securing finance for SMEs in the UK. They connect businesses which are creditworthy with money lenders looking to invest in fledgling companies with potential. The platform offers more transparency than traditional lending, and claims to have helped no fewer than 35,000 businesses to date. After an application is made, Funding Circle reviews and accepts, providing creditworthiness can be proven. They take care of all the distribution of repayments to investors, too.

 

RateSetter

RateSetter offers the opportunity to borrow at 3.9% representative APR for £5,000 loans over one year. They will provide you with a quote for loans all the way up to £35,000. It is a similar platform to Funding Circle which incentivises investors with the claim that every single investor has received the repayments owed to them. There is also an option for asset finance which is intended for business growth, covering a range of terms all the way up to £500k.

Zopa

Zopa describes itself as the pioneer of peer to peer, and it has a range of awards to its name which back up this title. You can receive a personalised quote for loan rates in a matter of minutes, and a lot of the time these rates are lower than those offered on the high street. There is a quick quote calculator on their website to help you get started, and APRs typically range from 2.9% to 34.9%. As with the other peer to peer loan platforms mentioned, Zopa connects those looking for a loan with willing investors and has approved over £3.17 billion in loans to date.

So that is our run through some compelling peer to peer business loan options. Remember to do your research and seek professional financial advice if necessary.

Business Loan FAQs

What is a business loan?

A business loan is just that, a loan intended for business purposes. They are typically either secured or unsecured and like all loans it will accrue interest that has to be repaid alongside the outstanding debt.

More info on what is a business loan here.

Can a personal loan be used for business?

A personal loan can be spent however you see fit.

However, you may wish to err on the side of caution as you will be held personally responsible for the loan’s repayment, regardless of what you spent the money on.

Also personal loan lending limits tend to be lower than that of a business loan and the interest rates are higher.

What do I need to qualify for a business loan?

There are no hard and fast rules as to what you need to do to qualify for a business loan.

But you can help yourself by:

  • Building up your credit score.
  • Understanding and matching the lenders qualifications and requirements.
  • Having all of your financial and legal documents sorted.
  • Developing a strong business plan and providing collateral.

 Do business loans require down payment?

Down payments for business loans vary depending on the type of business loan, the purpose of the business loan and the borrower’s profile.

Why do businesses need loans?

The reason a business borrows money will be unique to that business, however most businesses require a loan to:

  • Expand operations
  • Purchase new equipment to encourage growth
  • Purchase inventory
  • Increase their working capital to manage day to day operations

How do I get a business loan from the bank?

To get a business loan from the bank have all your ducks in a row:

  1. Create a serious business plan including a strong financial plan.
  2. Be clear what you want the money for.
  3. Know how much money you want.
  4. Get your credit score above 700.
  5. Keep proper and accurate financial records.

Do I need to be the owner of a company to get a business loan?

You do not have to be the owner of a company to get a business loan, you have to at least be the registered company director.

You don’t need to incorporate your company either (if you’re a sole trader) to get access to finance. However, as a sole trader you will be personally liable for any debt you incur, whereas you can limit your liability if your company is incorporated.

What is a director's personal guarantee?

If your company is newly formed or has limited assets, the bank or creditor will require some assurances, when you apply for a loan, that you will be able to pay it back.

These assurances could include being asked (as the company director) to give a personal guarantee that you will repay the loan, should the business default on its obligations.

Do I need a business bank account for a business loan?

This depends on the type of business loan you are looking to get and what the lender requires of you.

Most high street banks advise you to get a business account with them if you wish to access finance, as it allows you to build up credit history for your business.

What happens if your business cannot pay back a loan?

If your business can not repay its loan, you will typically be given a time period to make up missed repayments.

After that time you could be hit with additional fees, fines and administration costs. Your personal and business credit scores will take a hit, making it harder to access credit in the future.

If the credit provider has to take legal action to recoup costs, it could result in you filing for bankruptcy.

Could I lose my home if my business defaults?

This depends on the type of loan you have, whether it is secured i.e. you have put up collateral (your home), or whether you have signed a director’s personal guarantee.