At some stage in the life cycle of a business it will need some help with financing, this could be to cover a shortfall, increase staff headcount, purchase new machinery / equipment or simply just to boost cashflow. One of the most popular forms of finance is a business loan, they are available for a multitude of uses and are agreed directly with the business. It is considered a commercial agreement with no requirement for a personal guarantee, the contract is between the business and the lender.
A business loan will work in a similar way to a personal loan, you identify the funds required, complete your research and prepare your application. One of the key decisions upfront will be whether to apply for a secured or an unsecured loan.
- A secured loan is where you apply for funding and use a business asset as the security. This is an ideal solution if you are looking for a large investment of money as the collateral of the asset will cover the value should a business face financial difficulties and start to struggle with the repayments.
- An unsecured loan does not need any security in the form of a business asset, instead a personal guarantee would be used. Often the loan value is generally lower in comparison to what is available via the secured loan route, but it is as equally diverse and can be used for a range of business uses.
When the decision has been made on the type of loan required, the next step is the application process. The following is a list of the key documentation needed:
- Business bank statements
- Financial statements and reports
- Relevant business credit scores
- Business tax returns
- Legal documentation
- Identification for both the business and company directors
If an unsecured loan is required with a personal guarantee, then there will also be some personal documentation required:
- Application from somebody who is 18 years or older
- A UK bank account
- A business which is based in the UK
- Proof of UK residency
Once the decision has been made on the type of loan required and the paperwork collated, the next step is probably the most crucial. This is the application process, making mistakes at this stage can result in an unsuccessful submission. Some of the common mistakes to avoid are:
- Do not make any impactful changes to the business during the application period.
- Ensure your credit score is 100% accurate
- Have a professional business plan prepared
- Do not make any false declarations on the paperwork
Probably the most important pieces of advice we would give is always try and consult with an expert. We know first-hand how important this is. Often, we are approached by clients to help with their application process who then speak with their local Bank and decide to deal directly with the Bank. After a frustrating 3 months we will then get a call to say the Bank are causing delays so could we assist in finding a suitable lender. The benefit of using an independent finance company is that we can match your application to relevant lenders who we know will be able to offer the finance required.
Why you find out more by calling us on 01993 706403 or e-mail email@example.com.