Feb 26

Feb 26 What small business loans can you apply for?

Most companies, irrelevant of size, are likely to consider funding at some point in their business lifecycle.

You can use a small business loan for:

Hiring more staff
Purchasing equipment
Investing in stock
Paying for crucial expenses
Easing cash flow issues

With so many lenders on the market offering a wide variety of business loan solutions, there’s a business loan option out there for almost every SME, but you may find it hard to decide which one is right for you.

It is possible in some cases to get a small business loan if you’ve been trading for less than two years, have a relatively low turnover or a less-than-perfect credit history.

Here is an overview of the different types of small business loans on offer.

CBILS or BBLS loan - COVID government backed loans

If your business has been adversely affected by the coronavirus pandemic, you may be eligible for a CIBLS or BBLs loan. You won’t have to pay any fees and the Government covers payment the first 12 months of interest payments.

The scheme is due to end on 31 March 2021 although we may see an extension at next week's budget, on 3 March.

Invoice finance

Invoice finance is designed for small businesses that invoice customers or clients. It’s usually used to help with a business’ cash flow if their customers or clients have a long lead time before settling their invoices. The invoice finance lender advances the value of your invoices for a fee so that you can receive the cash now whilst waiting to get paid.

Merchant cash advance

This is a flexible option for small businesses. The loan lender advances you the loan and you repay it back via a percentage of your overall card sales. How much the lender is willing to lend will depend on how much you make through customer sales, as well as other factors.

Term loan

A term loan is the traditional loan, secured or unsecured, that requires you to pay back what you owe in monthly instalments over an agreed period of time.

Revolving credit facilities

This is another flexible form of finance to help provide working capital, a good alternative to a bank overdraft. Just like an overdraft, you can tap into it when you need it and only pay interest for funds used. This is one the many flexible funding solutions on the alternative finance market today.

Bridging loan

This is a short term finance option which allows for pay off in a short period or a longer period of time. Bridging loans are popular with businesses operating in the property industry but can be used by a variety of businesses, including startups.

Business credit card

The added benefit of having a business credit card is that, if used wisely, it can help you build up a positive business credit rating. Company credit cards can also provide you wish access to cash on an ad hoc basis.