How Do Business Loans Work?

It can be a daunting prospect when you’re considering taking out a business loan. Knowing exactly where to start, and who you should contact can be some of the hardest steps in the process. But trust us, taking out a business loan is actually a lot simpler than you might imagine.

In this article, we will take a look at just how business loans work, how you can get one and some of the reasons you should use a business loan.

Business Loan

How Can I Get A Business Loan?

The process of getting a business loan is much simpler than you might actually imagine. If you’re looking to consider your options before diving head-first into applying for a loan (and you should be!), then we would suggest you follow these simple steps:

  1. Identify the need for a loan – The natural starting point for anyone looking to take out a business loan is identifying a need for extra cash flow coming into your business. At this point, it’s worth considering just how much you’ll realistically need to borrow.
  2. Compare quotes – Now you have compiled several quotes from companies in your surrounding area, it’s time to see what the best option is for your business. You will find the cost and length of loans can vary massively, so take the time to consider what works best for you. Consider things such as: do you want to pay your loan back over a longer term, or take advantage of a shorter loan and repay a smaller fee at the end?
  3. Gather your financial documents – By this point you should have a good idea on the company you’re looking to take your loan out with, so now is the perfect time to prepare all the evidence you can that will help in your application. Gather documents which show your company’s annual revenue, your credit score and any other financial information which may aid in your application.
  4. Apply – If you’ve followed all of the above steps, you should now be in a position to apply for your business loan. Whilst this can be a time-consuming process when done properly, once you have reached this step, you’ll find things can move quite quickly. Providing the potential loan company is happy with your financial situation, you could expect to see the funds in your account within one working day.

Why Would I Use a Business Loan?

A common question among many SME business owners is ‘why would I need to use a business loan?’, and this is a completely sensible question to ask. It can be appealing to try and work your way into a position where your business is earning enough money to be self-sufficient and even earning a profit. But the reality is that only a small percentage of newly formed businesses actually start making a profit in their first few years of operating.

In fact, business loans are fantastic for established SMEs who are looking to grow further but don’t have readily available funds to do so.

Business loans provide a company with instant cash flow, which is vital when business is slow at certain times of the year.

A few other reasons you might be looking to take out a business loan are:

  • Your business was hit with an unexpectedly high tax bill – These types of things can happen from time to time, especially if your business is relatively new. A business loan can help you to pay off any unexpected tax bills with ease, with a payment plan implemented to fit around your business needs.
  • You are looking to fund a recruitment push – You may have just won several new contracts which has guaranteed your company a substantial amount of monthly fees for the coming year, but your workforce could be too small to meet demand. If this is the case, you could take out a business loan to secure working capital immediately, to start a recruitment drive.
  • You need to purchase a new piece of equipment – From time to time key pieces of equipment needed to help your business operate on a day to day basis will break down, in these cases you may need a loan to quickly purchase new equipment which is vital to your operation.

You may also be surprised to learn that business loans which are taken out with reputable companies are extremely flexible. These types of finance providers understand the trials and tribulations faced by SMEs and are generally ready to offer businesses a plan suited to their needs.

Business Loan

Why Choose a Short-Term Business Loan?

One of the most popular loans many SMEs take out is a short-term business loan. The immediacy of a short-term business loan is also a very attractive benefit for many business owners, as you can expect to see funds transferred directly into your bank account in as little as 24 hours after approval.

It’s also worth noting that taking out a short-term business loan is usually offered on an unsecured basis, which means that you won’t have to put any of your personal or business assets at risk when applying.

There are many more benefits a short term business loan can bring to your business, and you can find out more by reading our previous blog post on this subject.

If you are looking for a short term business loan , be sure to get in touch with our friendly and professional team. You can contact us by simply filling in our simple online form or by calling 0330 0582 330.

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