Starting a business is both exciting and daunting. It comes with a lot of challenges and decisions to make, including how to finance the business. One of the most common finance options is taking out a loan. It allows you to access the money you need quickly and can help you get the cash injection you need to start your business.
When considering a loan for your business, it’s important to research the different options available and make sure you choose one that is right for you and your business. Here we explore whether a loan is the right finance option for you along with some of the best small business loans in the UK market.
What are Small Business Loans?
Small business loans are typically loans of up to £100,000 offered to small businesses in the UK. These loans are designed to help businesses start up, expand, or cover short-term cash flow problems. They can be used to purchase equipment, cover the cost of stock, or fund the expansion of a business.
The process of applying for a small business loan is similar to that for any other loan; you’ll need to provide financial information about your business and evidence of your ability to repay the loan. The amount of money you can borrow will depend on your credit score and the amount of collateral you can provide.
Should I Take Out a Small Business Loan?
Before taking out a loan for your business, it’s important to weigh up the pros and cons. Here are some of the advantages and disadvantages to consider:
Advantages of a Small Business Loan:
• Quick access to cash: Small business loans can provide businesses with quick access to funds, meaning you don’t have to wait for months to get the cash you need.
• Flexibility: Small business loans are often flexible, allowing you to choose the repayment terms that suit you and your business.
• Low interest rates: Depending on your credit score, you may be able to access competitive interest rates on your loan.
Disadvantages of a Small Business Loan:
• Risk of default: If you don’t manage to make your repayments, you could be at risk of defaulting on your loan.
• Risk of debt: Taking out a loan can put you at risk of taking on too much debt and damaging your credit score.
• High repayment costs: The repayment costs of a loan can be high, meaning you may not be able to access the funds you need.
Best Small Business Loans in the UK
If you decide a loan is the right finance option for you, there are a number of small business loans available in the UK. Here are some of the best:
• Barclays Start-up Loans: Barclays provides loans of up to £25,000 to new businesses. You can access funds quickly and have up to five years to repay the loan.
• British Business Bank Start Up Loans: The British Business Bank offers loans of up to £25,000 to new businesses. The loan comes with a fixed interest rate and you can borrow the money for up to five years.
• Virgin Start Up Loans: Virgin Start Up Loans provides loans of up to £25,000 to new businesses. The loan has a fixed interest rate and you can borrow the money for up to five years.
• Government Start Up Loans: The government offers loans of up to £25,000 to new businesses. The loan comes with a fixed interest rate and you can borrow the money for up to five years.
• Funding Circle Small Business Loans: Funding Circle provides loans of up to £250,000 to small businesses. The loan has a fixed interest rate and you can borrow the money for up to five years.
• Metro Bank Business Loans: Metro Bank offers loans of up to £50,000 to small businesses. The loan has a fixed interest rate and you can borrow the money for up to five years.
• NatWest Business Loans: NatWest provides loans of up to £50,000 to small businesses. The loan has a fixed interest rate and you can borrow the money for up to five years.
• Lloyds Bank Business Loans: Lloyds Bank offers loans of up to £50,000 to small businesses. The loan has a fixed interest rate and you can borrow