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 Money
Page > Business
Services > Loans - UK Guide
 In a
nutshell
A loan designed for use by a
business.
Best
Loan for
Any business owner that wishes to raise
loan finance from start-up stage through to more established
companies.
Loan
Amounts
The amount your business will borrow will
firstly depend on your lender and on the type of loan you wish
to take out. Lenders will generally be quite flexible with
business loans but will, at the end of the day, be looking
closely at your business, its balance sheet and what you need
the money for before they decide whether to let you borrow the
sum you require.
Loan
Period
Business loans typically last between 1-15
years, although you will be able to negotiate different deals
with some lenders.
Loan
Advantages
The primary advantage with a business
loan is that it is designed for business use. So, it can
generally be much more tailored to your specific needs and
you'll probably be given a better range of options than you
would get from a personal loans provider. You can, for
example, negotiate payment holidays and payment methods to
suit your needs. You can even use business loans as a source
of finance even if you don't really need it - so, you won't
have to spend your own business cash/capital and can keep it
for other purposes. And, because you won't be selling a stake
on your company you'll keep ownership. Some business loans can
also be off-set to gain tax relief which can have a great
effect on your tax bill as a whole.
What to
look out for
You may have to provide extra
guarantees to your lender to get the loan you need. This may
include the assets of your business and - in some cases -
you'll need personal guarantees as well. There is always a
risk attached to borrowing money - in general business loan
terms this means you risk losing your business. If you put up
personal guarantees then it's your own assets that will go
such as your home etc.
Even without personal guarantees
you could pay a high price - for example, a sole trader will
be held responsible for all loans held by his company and a
partnership will all share equal responsibility.
You
may also find that some lenders will insist on certain
business conditions being met throughout the life of your
business loan. So, for example, they may specify that you must
manage your debt to equity ratio (gearing) at certain levels
during the life of your loan. If you don't meet their
conditions then they have every right to ask for you to settle
up your loan immediately. It's wise to seek specialist and
independent advice here as it's all too easy to choose the
wrong type of loan for your needs which could result in paying
too much for your financing and putting your business/personal
assets at risk.
Alternatives
A
business loan is probably the best option to raise commercial
finance in the sector as a whole. Government grants and
business solutions may be an alternative option, as may
venture capital services.
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