Before applying for a business loan in London, there are many things to consider. When done right, loans can help you improve or expand your business based on your goals. This article is a quick guide that you might want to read before getting a loan for your business in London.
In simple words, a loan for your business is a sum of money that is lent to your business. The business owner may use the funds as they wish. However, they must pay back the money, the total sum lent, and any interest added before a predetermined date. Usually, the loan is settled (paid back with dues) through monthly installments. Any SME is eligible to obtain a business loan in London.
There are two types of loans for your business that you could opt for based on the security against which the borrowed money is tied up – that being secured loans and unsecured loans.
Secured Loans – Loans that require the borrower to secure the money they’ve burrowed with a business asset. Businesses usually use the asset that they are to purchase with the loan (machinery, vehicles, properties etc.) as the ‘security’. If you do not pay back the loan on time, the lender has all the rights to own the asset. Therefore, there is a sense of security for the lender as this option is much less risky. Secured loans usually allow for higher amounts, long-term borrowing with low-interest rates.
Unsecured Loans – Loans that do not require tangible security. The loan may be secured against the business’ cash flows instead or to the business itself (completely unsecured lending). In the case of the latter, failure to repay the debt will require the business to be sold as a ‘going concern’ to repay the outgoing loan. Therefore, the borrower is still made 100% liable. Unsecured loans come with higher interest rates and lower amounts of money lent.
Other types of business loans in London that could be secured/unsecured include
· CBILS loans
· Merchant cash advance
· Term loans
· Revolving credit facilities
· Invoice finances
· Bridging loans
· Business Credit Card
Applying for a business loan is as simple as filling in a form. However, the challenge is getting the prerequisites straight. Before you apply for a loan, make sure what you use your finances for will help you generate more revenue in the long run. This way, you will eventually be able to pay back the loan. Have a good idea of how soon you want the loan to be settled and how much interest you are willing to pay in the meantime.
Need help with applying for a business loan in London? Let our business and financial experts help you pick the type of best loan payment plan for your situation. Get in touch with us for more details.