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A small business loan is essentially a sum of money that you borrow from a lender, and you agree to pay back with interest over a set period. These loans are designed to help your business, whatever your need may be. For example, you might want to:
As the name suggests, small business loans are designed to help entrepreneurs and SMEs. Whether you're planning to expand your workforce, grow your client base, add to your existing assets, or simply need some financial breathing space to achieve your goals, a small business loan can provide the support you need.
In the most part, lenders offering business loans offer them to limited companies or partnerships (companies registered as CompaniesHouse). There are some lenders who can offer loans to sole traders.
Small business loans work by providing a lump sum of money to your business that you repay over a set period, usually with interest. The terms, interest rates, and repayment schedules can vary depending on the lender and the specific loan product. Some small business loans may require collateral, which means they are secured against an asset, while others may be unsecured, meaning they do not require collateral.
There are many different small business loan providers, so it's important to try to find a lender which best meets your needs.
Whether you need fixed or variable rates, short or long-term solutions, small business loans offer a variety of options to meet the specific needs of your growing business.
Our advanced loan matching platform connects your business with lenders experienced in your industry or sector, ensuring you get the right support and expertise.
Before applying for a loan, it’s helpful to estimate your potential loan repayments. Our small business loan calculator helps you estimate your monthly repayments based on the loan amount, interest rate, and repayment term. Simply enter the relevant details to see how different loan scenarios could work for your business
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To be eligible for a small business loan, you generally need to:
Lenders may also look for positive cash flow, or a solid business plan to achieve positive cash flow as part of their assessment.
If you don’t meet these criteria, it doesn’t mean we won’t be able to help you get a business loan. However, meeting these requirements will maximise your chances of approval and give you more options.
Here’s a step by step of how the process of applying for a small business loan works with Capitalise:
Typically, you’ll need to provide the following documents when you apply for a small business loan:
There are several types of small business loans available in the UK, each suited to different needs. Here are some of the most common:
No personal guarantee small business loans: These unsecured loans do not require the business owner to provide a personal guarantee, meaning your personal assets are not at risk.
Business lines of credit: Similar to a credit card, this allows you to borrow up to a certain limit and only pay interest on the amount you use.
Invoice finance: Allows you to borrow money against your outstanding invoices to improve cash flow.
Asset finance: Specifically designed for purchasing business equipment, cars, vans or plant and machinery, With asset finance, the asset itself is often used as collateral for the loan.
Merchant cash advance: For businesses that use card terminals, this type of loan provides a lump sum which is repaid through a percentage of your daily card sales.
Short term small business loans: These loans are typically for a smaller amount and are repaid within a year or less. They are ideal for immediate cash flow needs or short term projects.
Long term small business loans: These loans are repaid over several years and are best for significant investments like purchasing property or large-scale expansions. They offer lower monthly payments but require a longer term commitment.
While a good business credit score can significantly improve your chances of getting a loan with favourable terms, it's not always a strict requirement. Some lenders can provide bad credit business loans where they will focus more on your business's cash flow, than credit history.
However, having a good business credit score can help you secure better interest rates and loan terms, so it's wise to check your business credit score before applying. If your credit score is low, consider reviewing your credit profile with Capitalise. In 96% of cases, this results in an improvement, putting you in a stronger position to apply for a loan.
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Yes, some lenders do offer small business startup loans. However, these can be more difficult to obtain due to the limited options available. Once you have a few months of trading history, more financing options become available to you.
Finding the best small business loan will involve comparing various lenders and loan products to determine which one suits your business needs best. Using a loan matching platform like Capitalise can help streamline this process by pairing your business with lenders that offer competitive rates and favourable terms based on your specific requirements.
Interest rates on small business loans vary depending on several factors, including the lender, the type of loan, the loan term, and how creditworthy your business is.
Generally, rates can range from as low as 9% to upwards of 20% or more for high-risk borrowers. It's important to compare offers from different lenders to find the most competitive rate for your business.
The time it takes to get a small business loan can vary widely depending on the lender and the type of loan. Traditional banks might take several weeks to process a loan application. Whereas alternative lenders could approve and disburse funds in a matter of days.
When you search for funding with Capitalise, you could get a business loan in as little as 48 hours from application.
Small business loan terms can vary based on the lender and the specific loan product you choose. Here’s a general breakdown:
Short term loans: Typically 3 to 18 months.
Medium term loans: Usually 1 to 5 years.
Long term loans: Can range from 5 to 25 years.
The terms will also depend on the loan amount, the purpose of the loan, and the financial health of your business. It's important to choose a term that aligns with your business's cash flow and repayment capacity.
