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Compare Business Loans

Everything you need to know about business loans

As a business owner, it’s probable that there will be times when you consider taking out a business loan. It can be a great way to help keep your business on the right track, and can allow you to overcome temporary cash flow issues. You may even want a loan to help to cover your start-up costs. However, just as you should with any kind of loan or financial product, it’s always wise to do your research first. Once you’re armed with this information, you’ll be ready to compare business loans available to you.

What is a business loan?

Unlike a personal loan, a business loan is taken out on behalf of a company rather than to benefit an individual’s personal finances. You don’t need to be the business owner to apply, as many business loans can be applied for by a registered company director instead. However, your personal financial eligibility will be assessed alongside your company’s financial records.

You may be asked to provide a business plan if the loan is intended to help you start your enterprise. Interest rates will vary according to a number of factors, and there are loans available for as little as £500, up to several million. Some loans will only be available to companies meeting a threshold amount of turnover. Different lenders may specialise in different forms of business loans, such as those for small businesses, or start-ups.

Compare business loans—what are the different types?

There are several types of business loan available, and it’s important to understand the differences in order to make the right decision for you.

Secured business loans are a good option for businesses that want to borrow larger sums of money, however, they require that you secure the loan against some form of collateral that you or the business already possess. This could be assets owned by the business (including profits, equipment, and stock), your own personal savings, or property. It’s important to recognise that the security you provide (be it your home, savings or business assets) could be at risk if you fail to make the payments on your loan, as your creditor could sell it to reclaim their money.

Unsecured loans

Unsecured loans, meanwhile, are taken out without your business or yourself needing to provide any form of security, although some may be granted only when a guarantee of repayment is provided by a company director.

Peer-to-Peer lending is another option, which involves borrowing from other people (private investors) rather than a bank or financial institution. Peer-to-Peer lending (also known as P2P or crowdlending) is done through a special platform, and is potentially a cheaper option but offers less protection.

Business loans come in many forms, and understanding which loan is right for your business’s needs can save you money in the long run. Compare business loans to find which is best for you.

Bank loans

As the name suggests, these loans are given by a bank or building society for sums up to around £250,000. These business loans are most often unsecured, with the repayments scheduled over one to fifteen years. However, they usually require a director’s guarantee.

Short-term loans

These have the highest rates of interest, but can be a fast solution to temporary financial issues. They usually last for a period of weeks or months, rather than years, and you can borrow up to £200,000.

Cash advance loans

For a set fee, cash advance loans allow you to borrow against your business’s projected credit and debit card sales. It’s interest free, with your repayments made by automatically taking a percentage of each card transaction you process. This means that when your business is making fewer sales, you are repaying less than at busier periods, which can be an advantage.

Invoice finance

Unlike a cash loan, here the lender purchases your outstanding invoices from you, meaning that you gain access to money owed to your business. It’s offered by banks, building societies and specialised companies. Your business pays a fee to the lender for this service.

Government loans

The UK government offers start-up loans of up to £25,000 for new businesses, with low interest rates. It currently also offers loans to support companies hit by the Covid pandemic.

Applying for a business loan

If you think that you know which product is right for your business, you can begin to think about the other important details.

You will need to determine exactly how much you need to borrow, so get costing estimates to help you gain the most accurate overview. Be sure to apply for an amount that you are confident that you will be able to repay—it will leave your business in a far worse financial position if you overstretch yourself. Defaulting on a loan can not only lead to fines, but can negatively affect your and your company’s credit rating, making it much harder to secure finance in the future.

Take the loan repayment period into account when making your decision—shorter repayment periods often come with higher rates, but you will ultimately pay less interest overall. A loan repayment calculator is a useful tool for comparing the total cost of different loans. An independent business loans comparison site such as Bright Compare is an excellent means of seeing which loan will work best for your enterprise.

Choose independent smart business loans comparison

It may seem daunting when you’re confronted with the sheer range of options available, but luckily help is at hand. Bright Compare can guide you to the right decision, helping you to compare business loans in order to find the perfect solution for your company’s unique needs. With the latest in smart technology, Bright Compare can provide the information you need to make an informed business loans comparison, simply by entering a few details. And when it’s time to apply for your chosen business loan, we can help you with the forms, whilst you can feel reassured that your valuable data is secure.

Bright Compare is the easiest and smartest way to reach the right decision.

Frequently Asked Questions

To qualify for a small business loan, you must be registered to operate as a UK based business. Most lenders will typically offer finance limited companies and some traders that have been trading for over two years.

Yes, most banks will offer business loans, providing you meet their affordability lending criteria and you qualify against who they will lend too. By running a price comparison search you will be able to get a better idea of interest rates and which provider will be most suitable for you.

There a start-up loans available, and some government run schemes which will offer a start-up business loan if you meet the criteria. Have a look on for more information on this.

Of course it is a good idea to compare business loans. Each lender has a different criteria for offering the best rate on a loan. So the best idea is to compare the market for business loans before going ahead.

Great question. Here at bright compare we have partnered with the top brokers and lenders across the business loan market. In turn giving our customer the best rates and options when comparing for them to choose from.