Navigating Loans for Small Businesses

Running a small business comes with a whole host of challenges, one of which is the question of how best to grow and sustain your business activities. Knowing how and where to apply for loans can be a tricky business, not to mention the amount of information available out there is pretty overwhelming too. If you’ve found yourself on this page, the chances are you already know this all too well and have come in search of some concrete answers. Lucky for you, you’re in the right place!  

In this guide, we list some potential business loans available to you, the eligibility requirements for each, and what you should be aware of before you start making any applications. After all, it’s important to be fully equipped with all the knowledge so that you can go on to make informed decisions that will benefit not hinder the business. 

What is a small business loan? 

Small business loans are a form of financial assistance that allows their owners to cover operational costs and grow their business. They are normally for a fixed term, and it is expected you repay both the capital and the interest within this time. These loans play a big role in ensuring business owners that don’t normally have access to other forms of financing still get some support.   

What can a business loan be used for? 

People take out small business loans for all sorts of reasons. Here’s a few of the most popular ones: 

• Buying new equipment 

• Buying or moving to new premises 

• Hiring new employees 

• Boosting cash flow 

• Purchasing inventory 

• Marketing & advertising 

• Managing daily running costs 

Taking out a loan for your small business is a great way to get an extra boost that can aid your growth and contribute to the overall financial health of the business. 

Being prepared 

The best piece of advice we can give to begin with is to be patient and be ready to do some research. It may sound trivial and self-explanatory, but it’s more common than you think for people to simply jump in and take the first loan opportunity that is given to them. Doing adequate research and preparing yourself is key if you want to make sure you find a loan that truly matches your needs. 

To help get you started, we’ve listed a few of our top tips below: 

• Take your time to do the research. It might be tedious and time-consuming, but it will pay off further down the line. Knowing the different options available to you will help you create a clear overview of potentials that you can match to your business needs. 

• Make sure you understand your needs before making any applications. Instead of letting the loan choose you, make sure you’re actively choosing it first.  

• Keep an eye out for the interest rates and terms. This is often a big deciding factor for people and for good reason; it’s important to know you’ll be able to afford the fees and repayment plans. 

• Organise your documents. Whatever loan you decide on, there is going to be a lengthy application process and that means paperwork. Anything you can do to help speed up the process, such as having your business plans and credit history ready to go, is a plus.  

• Building a good credit score. It’s no secret that a high credit score is a sure way to increase your chances of a loan that comes with more palatable interest rates and terms.  

Eligibility 

With any loan, there will be certain criteria you have to meet in order to be approved. These criteria will vary depending on the type of loan you choose, the amount you’re applying for, and who the loan is from. As a general rule, you’ll be asked about: 

• Credit scores 

• Repayment history 

• Trading history 

• Business assets 

• Business turnover & profitability  

It’s also a good idea to have your goals set and ready to go for when you’re asked about what you’re planning on using the money for. A solid business plan is a great route to success and will make you look like a trustworthy, organised person. 

Loan types 

The traditional funding sources include: 

• Banks loans – these are popular options for many small businesses and there’s a range on offer. This is the most traditional option for businesses. You may, however, feel that interest rates are too high or that you’ll struggle to repay the loan. It’s important you do your research, so you don’t end up harming your credit score. 

• Angel investors – an angel investor is a person who invests their own money in startup companies in exchange for shares in the company. As they’re normally heavily involved in daily operations of the business, this option is more suited to start-ups in need of some guidance.  

• Merchant cash advance – an alternative business financing option, MCAs provide businesses with an advance of funding in return for a percentage of future credit and debit card income. This is an ideal option for businesses that receive payments via a healthy number of card transactions each month. 

Of course there are plenty of other options out there too. We recommend getting professional advice, so you can be sure you’re making the right decision for you and your business. 

Getting professional advice 

Securing a small business loan can be overwhelming and time-consuming at the best of times, a headache and a necessary evil at the worst! That’s why we’re here to give you a helping hand if you need. Our team of expert accountants are ready to offer you the best advice, so you can make informed decisions. You may even find that, if no traditional loans suit your business type, it might be worth considering alternative loan methods or even grants. That’s all something we can discuss and help with.  

Get in touch

Read this blog and still have unanswered questions? Get in touch with us today and to start your small business loan journey!