Business Loans: How To Compare & Get The Best

Are you starting out a business? Do you have plans to expand your business by adding new locations or increasing its capacity? Whether you are a start-up or a business with years of experience under its belt, having enough money to support its operation or finance its development plans is very important.

It’s not a good idea to just walk in any bank and apply for a business loan. You should do some research to find out which loan providers can give you the best deals.

The good news is we’ve done the research for you and have created the following list of the 10 best loan providers in the industry. Santander

How To Improve Your Chances Of Getting A Business Loan Approved

It is very important to effectively manage your cash flow. That is why getting a business loan may be a good option to secure its financial needs. However, it is not easy to get a business loan.

Banks and other types of lenders following a qualification process when approving loans. The loan application process can be strict because of the risk involved when it comes to lending out money.

If you are thinking of applying for a business loan, here are 4 helpful tips that can improve your chances of getting approved.

1. Prepare a Solid Business Plan

It is not enough to tell the bank that you need a loan for your business. The bank or the lender wants to know the specifics:

• What are you planning to do with the loan?
• How are you going to spend it?
• What are you going to spend it on?
• How do you plan to cover the monthly payments?

These questions can be answered in a well-written Business Plan. A typical Business Plan will include information on the nature of the business, trends in the industry, your current business status including financials, and of course, details on how you will use the lender’s money.

For sure, the bank would want to see your financial statements which include projections on cash flow and income.

2. Clean Up Your Finances

In addition to the financial statements mentioned in the previous section, the lender would also assess your viability for a loan by determining your credit standing and your risk level.

The lender will also require you to submit your latest balance sheet to check if your business is stable. Likewise, the lender may schedule you for an interview with a credit officer.

3. Review Your Online Profiles And Social Media Presence

Lenders, especially banks, seriously take into account the borrower’s online presence. Checking up on your online profiles and social media activity is part of the lender’s due diligence work.

It is possible for the lender to visit your website to learn more about your business; its products and services. The lender could also run a quick Google search to uncover reviews on your business.

Finally, the lender will check your social media accounts and go through your content and assess the level of engagement between your company and its followers.

4. Make Sure Your Collateral Can Cover The Amount Of The Loan

Some lenders will require you to present collateral that will be used to cover the amount of the loan. The collateral acts as security should you default on your loan payments. Usually, the lender will accept the following assets as collateral for the loan:

• Real estate property
• Equipment
• Inventory

Lastly, if you want to be certain of your eligibility, use our loan eligibility checker. One click will determine whether you are qualified to apply for a business loan or not.

Best Business Loans: How To Compare

If you’re a small business owner, there are several reasons why you may want to apply for a business loan. You might need funds to cover your working capital for the next 6 months. You have to buy equipment or pay for services that you need prior to launch. You’re in expansion mode; you plan to scale up operations to accommodate the expected increase in production output

Whatever your reason is, you are probably thinking of going to your local bank and apply for a loan.

Before you do, it is advisable to consult with a trusted financial expert if it is worthwhile to get a loan. More specifically, you should find out if getting a loan would be a viable option. The bank would do the same thing.

man comparing business loans

Before a bank can grant you a loan, it will determine whether you are qualified to apply for one.

Even if you’ve been a customer with the bank for years, taking out a business loan is not a sure thing. The bank will have to do its own due diligence. This means the bank would want to review your credit history.

Likewise, the bank would need to see your business plan to find out what the money is for and your plan for paying the loan back.

3 Tips applying for a business loan:

1. Review your credit history

set aside proof of billing and other documentation that shows you are updated with your loans and subscriptions.

2. Prepare a business plan

It should include a feasibility study and financial projections.

3. Get advice from a trusted financial consultant

or an accountant to see if getting a loan is the best thing for your small business.

Remember, a bank will charge you interest for availing of a loan. The amount of interest would depend on the current status of your business, your credit history, and the financial projections.

What Are The Types Of Business Loans Being Offered?

Typically, a bank will offer 4 types of business loans:

Unsecured Business Loan

“Unsecured” means the bank will not require you to provide an asset – such as a house – to secure the loan. Thus, an Unsecured Business Loan is not that big; around GBP25,000.

Secured Business Loan

Because the amount involved is much larger, a Secured Business Loan will require collateral or an asset that will secure the value of the loan. As mentioned earlier, the asset could be your home or your business. Keep in mind that you might lose the asset if you cannot keep up with the payments.

Peer-to-Peer Business Loan

A good way to get a loan but take note of the conditions for borrowing. In some cases, the platform may only lend to specific types of businesses or professions.

Government-Backed Loan

government building

Governments also do their share to try and help private businesses gain traction. After all, your business gives the economy a boost in terms of employment and spending activity. Find out what loan programs are offered by your government and if you can qualify for them

The Pros And Cons Of Business Loans

Getting a business loan seems like a good idea and in many cases, it is. For small business owners that have limited access to funding, a loan would appear to be the best solution to get things moving.

However, there are risks involved with a business loan. It’s nice to be approved, for sure. Dealing with the realities of paying back the loan is a different story – a story many borrowers did not take seriously.

Here are the pros and cons of getting a business loan:

Pros:

Financial Flexibility

Capitalize your business; buy all the necessary equipment or fund your marketing programs, a loan will cover your necessary expenses so you can get the business off the ground and start making money.

Fixed Rate Option

Some banks may agree to give you a fixed interest rate which means you will pay the same amount every month. This way, you can stay within your cash flow.

Variable Rate Option

You may prefer a variable rate option whereby the interest charged on your loan will change depending on market forces. This option carries some risk as it could be higher if market movements run averse to your position.

Repayment Holidays

If your clients and customers are behind in paying you, a bank may consider giving you a repayment holiday whereby you don’t pay the loan for a period of time. However, once the payments are re-started, the interest charged on your loan will be higher.

More Control Over Your Business

Having the necessary funds means you have more control over your business. You don’t have to look for investors or partners to help you keep the business afloat.

Cons:

Your Business Will Be Closely Monitored

Every loan is covered by an agreement. By signing on-board, you will be subject to its stipulations, some of which can be very rigid. The bank could ask you to submit certain reports and have yourself be subjected to random financial evaluation.

Your Invoices Could Be Targeted

A Cash Flow Finance Agreement enables the business to release the money that has been tied up in invoices. This means you will be advancing the money.

Early Repayment May Not Be A Good Idea

If you think paying off a loan will put you in the good graces of the bank, think again. The bank will penalize you for paying off your loan before the term expires.

Are There Other Options Aside From Getting A Business Loan?

Assuming you have studied the option of getting a business loan but are concerned about the risks, there are a few alternatives you may wish to consider.

Business Credit Card

person using a business credit card

A business credit card can be an effective way to bridge-finance short term cash requirements. There are some business credit cards that offer limited-period interest-free arrangements on your purchases. Similar to a business loan, you will have to settle the monthly payments in order to avoid higher charges.

Overdrafts

This is another good option that can help you manage your cash flow by offering interest-free arrangements on your purchases. The APR on overdrafts is comparatively low which can make repayments more manageable.

Crowdfunding

If you don’t mind giving a piece of the pie to anyone –experienced and neophyte investors alike – crowdfunding could be the option for you. There have been businesses that have achieved growth using crowdfunding platforms.

large crowd of people

Cash-Flow Finance

This is an arrangement whereby money that is held up in invoices will be released therefore giving business owners access to immediate funding. The amount is based on a percentage of the invoice’s value – for example, 75% – with the balance forthcoming minus fees once your customer or client has paid.

Investments

Another way to secure funding is to sell off some of your assets to an investor. The advantage of this approach is that there is no need to pay off a loan and the risk is distributed with a business partner. Of course, decision-making may have to be shared. If this isn’t a problem for you, then you can consider selling some of your shares to an interested investor.

Santander

Santander is an institution in the international banking scene. The company provides small businesses with a wide range of financial solutions including business loans, overdrafts, asset finance, and invoice factoring.

Key Features:

• Loan packages start at GBP1,000; all amounts will be considered.
• You can apply for both small business and working capital loans.
• Commercial business loans are available.
• For working capital loans, funds can be released within 24 hours.
• For commercial loans, you can apply for fixed or variable rate loans.

Ulster Bank

Ulster Bank is part of the prestigious RBS group that includes NatWest. The bank’s offerings include business loans, asset finance, overdrafts, and credit cards. Ulster Bank is a strong supporter of small and medium-scale enterprises.

If you’re an existing customer of the bank, you can direct your application to the relationship manager. Likewise, Ulster Bank accepts applications from new clients.

Key Features:

• Base rate is used to determine the loan interest rate.
• You have the option to reduce the amount of borrowing at any time.
• Ulster Bank allows you to structure your repayment schedule to your needs.
• Flexible lending options are available.
• Dedicated team is put-together to assist you in the process.

HSBC

HSBC is an international bank that caters to both personal and commercial clients all around the world. The bank has a sterling reputation for helping small to medium-sized businesses acquire loans and other forms of financial assistance.

Among the bank’s most popular financial solutions for small business include the Flexible Business Loan and Small Business Loan programs. The Flexible Business Loan program can accommodate loans in excess of GBP25,000 with variable interest rates.

On the other hand, the Small Business Loan programs handle loans between GBP10,000 to GBP25,000 under a fixed payment schedule.

Key Features:

• Repayment terms of up to 10 years will be considered.
• You will be offered an interest-only period.
• Internet banking facilities are available.
• Availability of variable or fixed interest rate charges.
• HSBC will not charge you for additional repayments.

TSB

TSB is one of the most trusted banks in the United Kingdom. It is part of the Lloyds Banking Group and offers financial solutions such as the Enterprise Finance Guarantee, overdrafts, business loans, and mortgages.

The 2 business loan programs of TSB are the Fixed Rate Loan and the Base Rate Loan.

The Fixed Rate Loan provides assistance for loans between GBP1,000 and GB P100,000. The repayment period can range from 1 to 10 years. The Base Rate Loan covers loans in excess of GBP1,000 and repayable for 1 to 25 years.

Key Features:

• Option for unsecured and secured loans is available.
• Your choice of loan terms can be customized to your needs.
• You can avail of repayment holidays.
• The bank’s Funding for Lending Scheme can lower your interest rate by 1%.
• Loans from GBP1,000 to GBP100,000 will be considered.

Bank Of Ireland

Bank of Ireland has provided financial services as far back as 1783. However, the bank only accommodates businesses that are located in Ireland.

Bank of Ireland only has 1 small to medium-scale business loan program available. The loan can only cover amounts from Euro1,000 to Euro120,000. It should be noted that the bank customizes its business loan programs according to the customer’s cash flow.

Key Features:

• The bank can accommodate loans from Euro 1,000 to Euro1 20,000.
• Affordable and competitive interest rates.
• Flexible repayment plans are available.
• Option for unsecured business loans is available.
• Loans can be approved within 24 hours. Barclays

Barclays

Barclays is a highly-respected bank in the United Kingdom and is known for its wide range of financial products. Barclays provides financial solutions to small and medium-scale businesses that include loans, mortgages, asset-based lending, overdrafts, and cash flow finance.

Whether you are an existing customer or not, Barclays will consider your loan application for amounts that range from GBP 1,000 and GBP 100,000.

Key Features:

• Option for unsecured loans is available for amounts up to GBP 100,000.
• Funding can be received within 48 hours once your application has been approved.
• Payment terms for up to 20 years are available.
• Option for fixed or variable rates is available.
• You can avail of repayment holidays.

Bank Of Scotland

Bank of Scotland is part of the prestigious Lloyds Banking Group. It structures its financial services into 3 categories and customizes their programs accordingly.

Bank of Scotland’s Base Rate Loan covers applications beginning at Euro1,000. A repayment period of up to 25 years is available. The Fixed Loan Rate program covers 2 types of loans. The first one is for amounts that range from Euro 1,000 and up to Euro 50,000. The second one is for loans in excess of Euro 50,000.

Key Features:

• Repayment terms of up to 25 years are available.
• Fixed payment period for up to 1 year is available.
• You can receive online quotes right away.
• You can avail of either secured or unsecured loans.
• There are no arrangement fees for loans that are under Euro 25,000.

NatWest

NatWest is part of the RBS group that is well-known in the banking industry. NatWest provides business assistance programs such as loans, mortgages, invoice finance, credit cards, and asset finance to businesses located in Wales and England.

The bank offers variable loan rates for funding requirements starting from Euro35,001 with payment terms available from 1 to 25 years. Fixed rates are available for loans starting from Euro 35,001 up to Euro 10 Million.

Key Features:

• Loans ranging from Euro1,000 up to Euro 10 Million can be considered.
• 25-year repayment term is available.
• You can choose between fixed and variable rates.
• Loan programs for small to medium-scale businesses are available.
• You can request for repayment holidays.

Metro Bank

Metro Bank operates 7 days a week. You don’t need an appointment in order to transact with Metro Bank. The menu of financial services includes business loans, invoice finance, asset finance, overdrafts, and credit cards.

Metro Bank has 2 loan programs to choose from. The Business Loans are available for amounts that are above and below GBP 25,000. Fixed loan rates are open for loans that are under GBP 25,000. Commercial loans for funding requirements between GBP 150,000 and GBP25 Million are also available.

Key Features:

• Easy, fast, and convenient loan application process.
• Loans are customized according to your needs.
• You can avail of loans up to GBP 25 Million.
• There are arrangement fees if your loan falls under GBP 25,000.
• The bank does business 7 days a week.

Lloyds Bank

Lloyds Bank is an institution in the banking industry. The bank offers a wide range of financial products and services for start-ups and established commercial businesses.

Choose between the Commercial Fixed Rate Loan, the Base Rate Loan, and the Fixed Rate Loan.

If you need to borrow between GBP 1,000 to GBP 50,000, choose the Base Rate Loan which has repayment terms up to 10 years. The Commercial Fixed Rate Loan covers loans from GBP 50,000 to GBP 500,000. Meanwhile, the Fixed Rate Loan is for businesses that need funding up to GBP 50,000.

Key Features:

• Loan approvals can be done right away for loans up to GBP 10,000.
• You can choose between fixed and variable rates.
• High approval rate of 90%.
• You can request for a repayment holiday on some lending programs.
• There are no arrangement fees for loans up to GBP 25,000.