How to Be Smart About Getting a Small Business Loan

If you need a loan to help your small business get by in tough times or expand because you are starting to do well, it is important that you know how to properly go about getting the loan you need. Each year thousands of businesses in the UK apply for loans, but not all of them get approved. The more information you get on these loans, the more likely you will be to acquire the funds necessary to help your business thrive. There are a lot of things that don’t occur to most businesses, but they are crucial to keep in mind nonetheless.

Common Reasons for Getting a Small Business Loan

There are lots of different reasons that small businesses apply for loans, including:

  • Expansion: Many businesses need a loan to open a new location or expand in some way. If you are doing well and think it’s time to start expanding but don’t have quite enough cash, getting a loan is a good option to consider. One of these loans will provide you with the revenue necessary to grow your business by leaps and bounds.
  • Building Credit: Another good reason for a business to apply for a loan is to build up credit for later on. The better your business’s credit, the easier it will be to get bigger loans in the future. If you manage to pay off your first small loan on time, it will definitely work in favour of your credit. This is something that lenders will be sure to take notice of down the road when you apply for other loans.
  • New Equipment: If you require new equipment for your business, it might be necessary to get a loan from the bank. Whether it is new computers or something else entirely, this loan could go a long way towards getting your business what it needs to function efficiently.
  • More Inventory: Businesses that want to purchase new inventory should think about getting a loan. Seasonal businesses often get loans for this reason, and they can be incredibly helpful.

Look at Your Cash Flow

The only way that you will be able to get a loan is if your business has adequate cash flow. When you are applying for the loan, the lender will take a close look at the current profitability of your business. You will want to make a point of running the numbers to determine whether or not you will be able to pay back the loan on time. By doing this you can save yourself a lot of time and effort as well as disappointment. The amount of cash flow you’ll need to have will depend on the size of the loan you apply for.

Get Organized

One of the more common reasons that businesses get turned down for loans is because they were so disorganized when applying. Make sure that you have all of the necessary paperwork already together before you sit down to fill out the loan application. This will go a long way towards helping you to get approved. The lender will need quite a few different documents from you, including proof of cash flow for at least the past year. When you know which documents you will need to have in advance, you will be able to adequately prepare yourself.

Be Honest on the Application

Although you might be tempted to fudge certain things on your loan application, it is imperative that you are completely honest. Any inaccurate information on your application, even if it is an honest mistake, can mean being rejected. Double and triple check your loan application for errors before you submit it. This will boost your chances of getting the money you need for your business. Any lender will be very hesitant to give a loan to a business that doesn’t submit completely accurate information in their initial application.

Get Expert Advice

It’s always a good idea to talk with an accountant before getting a loan for your business just so you can make sure that everything goes as smoothly as possible. A financial expert of some kind can provide you with the information necessary to make the right decision. The last thing you want to do is get a loan without consulting with someone who deals with finances professionally, because you could end up making a horrible mistake.

Research Your Lender Options

You should set aside a decent chunk of time to research the various lender options you have so that you can select one that is trustworthy and fair. If you want to get a great deal on a small business loan with reasonable terms, you don’t want to choose the first lender you come across. This research will be hugely beneficial to you and your business, so make sure that you take enough time to do it. There are tons of lenders that give out loans to small businesses in need, but they aren’t all one hundred percent reputable. One of the most effective ways to select the right lender is to look up reviews for some of them online.

Getting a Loan with Bad Credit

If you have bad credit but still need to get a loan for your business, it is even more important that you weigh your options before rushing into anything. There are plenty of lenders out there that can give you a loan even with bad credit. While you might end up paying a higher interest rate, you will still be able to get the funds you need.

Make sure that you know what your credit is already like before you apply for a loan so that you know what to expect. Everyone should take a close look at their credit report every once in a while just to check for errors if nothing else. If you find any items on your report that shouldn’t be there, you could end up giving your score a much-needed boost.

Why You Should Think About Getting a Guarantor Loan First

Guarantor loans have become very popular among people with bad credit for a number of reasons, and it’s a borrowing option that you should at least explore before making a decision. This type of loan could help you to get the money you need quickly and easily. A lot of people don’t really know a whole lot about these loans, but it’s important to educate yourself before making a decision. The more time you take to learn about these loans and what they have to offer, the more likely you will be to apply for one.

The Basics

A guarantor loan is basically just a loan you get with someone else signing on to agree to pay back the rest if you are not able to. The standards for the guarantor can be fairly high, as they need to have a solid credit rating/history and adequate income. Some people have difficulty finding someone to act as their guarantor, while others are able to get one without any issues. If you are unable to continue making payments on your loan, the guarantor will be required to take over.

They Are Easy to Get

Perhaps the best thing about guarantor loans is the fact that they are so incredibly easy to get, even for those with very low credit scores. As long as you have someone who can meet all of the necessary requirements, you should be able to get the loan you need. The lender will still take a close look at your income, employment history and other things though. These loans are typically much easier to get approved for, and they have become a very popular option for those with bad credit in the UK because of this.

You Can Get Your Loan Online

These days it is possible to get the loan you need with nothing more than a computer and internet connection. You can apply for your loan online and wait to hear back from the lender via phone or email. This makes the whole process of getting a loan much easier and less stressful. You will be required to fill out an application with personal information to give the lender a better idea as to how much of a liability you are going to be. You must submit only truthful information in your application, because otherwise it will be rejected for sure.

Fast Approval

A vast majority of people who get approved for a guarantor loan receive their funds within 1-2 business days of getting approved. After all of the necessary documents have been submitted and you and the guarantor sign the contract given by the lender, you will receive your money. This is definitely one of the faster ways to borrow a significant amount of money in a relatively short period of time. A lot of people who submit an online application for a guarantor loan hear back from the lender within about 24 hours.

Longer Terms

Guarantor loans also tend to offer longer terms to those who need to borrow money. This means that you will have a long period of time to pay off the money you borrow. The length of your loan term will depend on the amount of money you borrow, so you will need to keep that in mind. Most lenders are pretty flexible when it comes to coming up with a reasonable term so you will be able to pay back the money you borrow without any issues.

Lower Rates

Anyone who takes out a loan of any kind wants to get the lowest possible rate. Guarantor loans generally offer fairly low rates, so you won’t have to worry about paying a ridiculous amount of money for the loan you need. This is something that can be particularly beneficial to those with bad credit. Most people do not consider just how much extra they are paying with a high interest rate, so you will need to keep this type of loan in mind before going with a certain option. The lower your rate is, the easier it will be for you to pay back your loan on time.

Choosing a Lender

If you are interested in getting a guarantor loan, you will need to make a point of looking for the right lender. There are plenty of private lenders who can help you out, but not all of them are the same when it comes to their standards for those who apply. When you take enough time to research your lender options, you will be able to get an excellent overall deal. Keep in mind that the lender you choose will be responsible for determining your interest rate as well as the overall terms and conditions of the loan.

Fewer Limitations

There aren’t nearly as many limitations with guarantor loans as there are with others. You will never be asked by any of these lenders as to what you plan on spending the money you borrow on. A lot of banks will require you to give them a reason for borrowing the money, but this isn’t the case here. Lenders also tend to be a lot more flexible when it comes to giving longer terms and even extensions when needed. This will ultimately work in your favour when it comes to paying back your loan on time.

Should You Get a Guarantor Loan?

You will need to consider a few different things before deciding whether or not to get a guarantor loan, such as the state of your credit. If you have bad credit and have been rejected by banks for a loan in the past, this could be the right option for you. Even those who have good credit might want to think about getting a guarantor loan first, simply because there are lower rates and more flexible terms. While you might have to spend some time finding the right person to act as your guarantor, it will be well worth it in the end.