In commercial finance, business loans are among the most versatile products: They serve to pay for equipment and staff, new supplies and even VAT and taxes. Depending on the business, lender and loan purpose, funds provided range from as little as £1,000 to over £1 million. Typically, a business loan term extends from 6 months to 5 years, though some lenders provide loans from 1 months up to 25 years.
How To Get A Business Loan
In order to obtain a business loan, borrowers have to fulfill lenders’ individual lending criteria. In principle, borrowers can opt for an unsecured business loan or a loan secured against one or more assets. As a rule of thumb, profitable and established businesses with a healthy cash flow will more likely be eligible for an unsecured business loan.
In addition, high street lenders may also take a floating charge/debenture, and, like most other lenders, a Personal Guarantee (PG).
Across the three common tiers of lenders, high street lenders will offer the most favourable terms and rates against tight lending criteria. In contrast, merchant and challenger banks and P2P funders widen their lending criteria though consequently charge higher rates. At CC Finance, we are committed to finding the lowest cost, most appropriate deals for all our customers.
Revolving Credit Facility
While borrowers can take out business loans over a fixed term for a specific purpose, a revolving credit facility is more flexible. This type of loan works like a rolling agreement that can be automatically renewed. Once the business pays back the initially agreed amount it can withdraw funds without the need for a new agreement. Other than a Personal Guarantee, a revolving credit facility usually does not require additional security.
Being a short term funding option for 6 to 24 months with higher fees than a fixed term loan, a revolving credit can turn out to be cheaper for businesses, such as certain contractors, who need to borrow small amounts of money on a regular basis.
Merchant Cash Advance
With merchant cash advance, trading businesses use their card payment machine to secure lending, rather than their personal or business assets. Each customer card payment reduces the amount of the business loan, until funding amount and fee are paid off. Subsequently, the merchant can start with another funding agreement.
Tax or VAT bill facility
One of the biggest spikes in your business’ cash flow can be tax payments. To spread out your annual or quarterly HMRC payments throughout the tax cycle specialist VAT and tax loans can help. Some of our lenders also consider proposals for corporation tax, capital gains tax and PI cover loans, and for VAT payments on property and assets.