How To Choose the Best Business Loan


When you are taking out a business loan, there are several different things that you need to think about to choose the correct one for your business. We understand that it can be a tricky process since there are so many options out there. Therefore, we have compiled a list of top tips for you to assist with the decision-making process.

No matter which business loan provider you choose to go for, there are a few basic lending criteria that almost everybody will ask for. The first will be: ‘How long has the business been trading?’ Usually, the lender will want to see that you have been operating for a minimum of 2 years. This is so they can see your history and decide whether you are credible for the loan.

Next, the most important metrics to show a lender is your annual turnover and profit margins due to the fact, that these are basic indicators of your business’s health. This not only demonstrates your ability to generate cash but also shows how likely you are to be able to repay the loan. We can help you prepare the management accounts that the lender will usually ask for to show your performance and cash position.

Finally, most lenders will check your credit history for your business and potentially your personal to check for potential issues. This could include late payments or more serious issues. After all, they are going to be relying on monthly payments from you so they want to ensure that you can fulfill them accordingly. If your business passes these initial checks, you now need to take a couple of things into consideration to ensure that the loan is the right one for you.

Are you going for a secure or unsecured loan?

Let’s break down what they both mean first…

A secure loan is a business loan that is ‘secured’ onto any valuable assets to the business. This could include property, machinery, vehicles, or even stock. This means that the lender can start to sell your assets in the event you do not keep up with the payments.

An unsecured loan is usually an option for businesses that have stronger turnover. Lenders who offer unsecured business loans want to be able to see good profits and trading history. This might include a personal guarantee which brings you as the business owner and your credit check into play.

How flexible do you want the loan to be?

Usually, business loans, are fixed-term with a fixed monthly repayment plan. However, if your business is not that easy to predict, you might prefer to opt for a flexible option. For example, some lenders will offer an overdraft style maximum which allows you to borrow when you need.

Characteristics of your business

The most important thing is choosing a business that fits best with your business. For example, if you can opt to go with a lender who specialises in your sector, then this might be a good fit. Therefore, it is important to reach out for advice if you feel you need it.

Finally, make sure you are happy that a business loan is the right way to fund your business. There are lots of alternative finance options out there that may suit you, we can help you decide this and have a great funding partner who can help source the right loan for you.

We offer a FREE discovery call that can help you build a vision for your business financially. To find out more, head over to our Discovery Call page here.