Business loans are very common and one of the first options for businesses looking to raise funding. The lender provides money that you, as the borrower, pay back, with interest, over an agreed period. Types of business loans There are many types of business loans available in the UK. They range from short-term to longer-term loans and can be either secured or unsecured. Secured business loans: With these loans, you’ll need to use an asset from your balance sheet as security. The lender may also consider third-party security, such as a guarantee, instead of or alongside other security. Usually, property is used as security, although other assets like stocks and shares can be used too. Unsecured business loans: This allows you to borrow without using any business assets as security. Often, you’ll need to provide a personal guarantee that says you’ll pay back the loan personally if the business can’t. Unsecured loans typically have higher interest rates and shorter repayment periods than secured loans.

Repayment period Your business loan will have a set repayment period. During this time, you’ll need to pay back the amount you borrowed, plus interest. The lender may charge you for paying off your debt early as it will have already committed that money to your business. Some lenders can offer no early repayment charge options, so its worth taking this into consideration when choosing the best lender for you. Interest rate The rate of interest you pay depends on how risky the lender deems it is to advance you the money. For example, if you: • have good personal and business credit scores • are willing to use an asset as security You’ll be deemed less of a risk than someone who: • has poor personal and business credit scores • is unwilling to provide security As a result, you’re more likely to be approved for a loan with a favourable interest rate. The lender might also offer you a fixed or floating interest rate. A fixed interest rate doesn’t change, so you know exactly what you need to pay for the duration of the loan. Floating rates can change, according to both the lender’s interest rate and the rate set by the Bank of England.

There are lots of business loan providers in the UK. They include: • high-street banks • challenger banks • Community Development Finance Institutions (CDFIs) • peer-to-peer platforms • other online providers The one that suits you best depends on what you can afford and whether you meet the lender’s eligibility criteria.

• Retain full control of your business • Flexible repayment schedules • Fixed rates of repayment • Access finance quickly

Charges You might have to pay a fee if you’re late with a payment or miss one altogether. Your credit report The lender will carry out a credit check to determine whether you qualify for a business loan. This will have an impact on your business credit report. If you default on your loan repayments (fail to make them), it may affect your business credit report and/or your personal credit rating. Assets as security Any assets you use as security (property, for example) may be at risk if you default on a business loan.

Every loan and loan provider are different but there are some common requirements that all applicants will need to meet. Your business must: • be able to demonstrate that it can afford to repay the loan • be based in the UK • have no late payments or outstanding county court judgments (CCJs) Your business credit score will have a direct impact on whether or not your application is approved. However, when reviewing your loan application, lenders are likely to check your personal credit report and score too. If either score is poor, you may find it more difficult to get a business loan. At the very least, you may not get the low rate of interest you’d originally hoped for. There are several websites that let you check your credit score online before you complete a loan application. They also provide details around how your score is calculated and what you can do to change it. Some questions to ask yourself • How will I use the business loan? • Do I have assets against which to secure the loan? • Can I afford the repayments? • Will I pay the loan off early if I'm able to? • What’s the interest rate? Is it rate fixed? • How long is the loan for? • Are there charges for paying it back early?

To get a business loan from a bank or other lender, you can apply: · Online · Via a Specialists Broker · In person at a branch You'll need to submit relevant documents that the lender will use to carry out its checks. There are lots of eligibility checkers online. These allow you to gauge whether your application will be successful, before you submit it. This is known as a soft credit check and doesn’t affect your credit score, even if your application is turned down.