Nibletz Staff
As a small business owner, or an entrepreneur about to launch a startup, you will know what its like working with a small budget. However, did you know that money problems are the second most common reason behind business failure?
While SME’s and startups do not necessarily need huge funds to thrive and grow, if your business begins to experience negative cash flow, it could be the beginning of the end.
When your business needs a cash injection, you may be tempted to apply for a Market Invoice business loan. A loan can help your business thrive but with so many what might seem complication options to choose from, you may be unsure where to start.
To help you apply for the right loan, here are some things to consider about borrowing for your small business.
Secured and Unsecured
There are two types of loans: secured and unsecured. The former is secured using business assets, which ensures that should you fail to make repayments, the lender can recover losses by selling your assets. This could include business cars, property or equipment. The latter involves no collateral but does often require a longer trading history by way of guarantee.
It is important to note that the type of loan you will be able to secure will depend upon your company’s history, trading time and credit history.
Research the Criteria
When applying for a business loan, your company will usually have to meet a certain set of criteria. For an SME, many lenders will ask to see two years trading records, turnover and profits, as well as your credit history.
For startups, the required criteria are usually more basic and may include permanent UK residence and less than two years trading.
Tip: After ensuring that your business meets the conditions, make sure you have all documentation required to make the application process quicker and smoother.
Fixed and Flexible
In addition to secured and unsecured, you can choose between fixed and flexible loans. Fixed loans have fixed payments. As such, when you agree to the loan, you agree to pay the same fixed sum every month until the debt has been cleared. Flexible loan repayments, on the other hand, differ depending on interest rates.
Both types of loans have their benefits, as fixed allow you to predict and allow for expenditure, while flexible loans could save you money if interest rates drop.
Purpose of the Loan
Before applying, it is important to think about why the loan is needed. Think carefully about how long you need the loan, how much money you need to borrow, how quickly you need the money and what you can secure the loan against.
Considering these questions will help you to determine what type of loan is best for your business.
There are a range of business loans available on the market, with some aimed at SMEs and others tailored for startups with no-to-little trading history. Before applying, do some research, think carefully about what type of lending is suitable for your business and take your time, to make sure you select the right loan.
