Whether you are a small business owner looking to expand your business or you have a brilliant idea to launch a new business, getting a business loan is no mean feat. To develop, many small businesses require loans and although it can be a little bit tricky to get one, there are quite a few options out there for you to pick and choose from. It’s always worth making sure that you have a way to manage the funds once you’ve got the loan as well, using a service like SoFi or similar. The type and terms of funding that you choose can have a big impact on if your business will be successful long term, so it is incredibly important that you choose wisely as making a critical error here could spell the end of your business. Below we have detailed some of the options available as UK business loans to small companies.
Taking Out A Short-Term Loan
If your business has a lot of expenses that it has to pay then a short-term loan is the perfect option for you. These will normally last up to 3 years and they can help take away stress by helping you temporarily ease your cash flow. This is an attractive option for many small businesses as it means you can pay less in interest than if you were to pay back the loan over a lengthier amount of time. However, you will need to remember that your monthly payments will be much higher. Other options that are similar to short-term loans include business credit cards and or agreeing to an overdraft with your bank. Check out the interest loans on each option to see what will work best for you.
Taking Out A Medium to Long-Term Loan
Loans that are roughly five years or more are classed as longer duration lending agreements. If you are looking to pay back the money slower, then this is the perfect option for you as monthly repayments will not take out as large a bite of your working capital. If you think it is going to be a while before your company get off the ground, then we would opt to choose a medium to long-term loan over a short-term loan. How much exactly you will pay back all depends on, of course, how much you borrowed but also how much your interest rates are. Interest rates can either be fixed for the duration of the loan or they can vary. If your loan is fixed then you will know exactly how much money you are to pay back each month, however, if it is varied then the interest rate can change and the amount that you owe will change in accordance to the economic climate. This could either work in your favour or result in you having to pay back more money than you initially thought. If you are opting for this type of loan, be prepared to provide a detailed business plan that will back up your loan request and ensure that you are accepted.