Every business needs a source of funding to get off the ground and into the market. Planning and preparation can go a long way when you are setting up your business. Identify how much funding you need, when you need it, and how you will delegate the funds. You may need funds to improve your product, develop marketing strategies or launch your brand in a new location. Set a goal and put the steps in place to achieve it.
Write a business plan and prep your finances
Banks and investors will want to see a detailed and thoroughly thought-out business plan. Set short-term and long-term goals aligning with your brand’s values and company culture. Business loans can be anywhere between £1,000 and £50,000 and are available to over 18s.
Before you apply for a loan, you need to make sure your books are straight, and your finances are in order. Look at your credit score and see if you can improve it over the next year by making repayments on time, paying bills and utilising your debt effectively. A business loan is a big and potentially risky step for small businesses – is a loan the best option for you?
Spend some time researching the different funding options, like invoice financing, overdrafts, private investment, government funding and crowdsourcing.
Alternative lender versus banks
Alternative lending options are brilliant for small businesses, who have been rejected by mainstream banks. Some lenders can assess your eligibility for a loan within a few minutes and let you know what they can offer you. The Open Banking system has become fairly popular with businesses in the last few years. Businesses can share financial information digitally with potential lenders and decide on loan applications much faster. This saves both the lender and business owner a lot of time and wasted resources.
On the other hand, bank loans are better if you are looking to borrow a large sum of money over a longer time period. Typically, banks can offer competitive rates and access to larger funding than alternative lenders.
Types of loan
There are many types of business loan available. The term loan offers a large amount of money that you will pay back with interest in regular instalments. A short-term loan offers higher interest rates and shorter repayment terms. You can also look into a business line of credit, business credit cards and merchant cash advances.
A Small Business Administration Loan is one of the most sought-after business loans in the UK. They offer huge lending amounts, competitive interest rates and brilliant repayment terms. They are paperwork heavy and are often considered the best financing small businesses can find.
Always examine your accounts to decipher which funding method is the most appropriate for your business.
