Like a pay-as-you-go flying carpet, every business idea needs money to get off the ground. Many of us might not be fortunate enough to have that spare cash lying around, but don’t give up hope. A business loan can be the enlightened way to get your brilliant business idea up and running.
Applying for a business loan might seem daunting, with loads of things to consider, but fear not – I will help you conquer that confusion.
Business loans, what are they?
A business loan is similar to a personal loan, but is designed for businesses to fund expenses such as start-up and growth. You’ll be lent a certain amount of money and have to pay it back over a period of time, with a set interest rate and monthly payments.
Can I apply for a business loan?
As with all loans, there are a number of criteria that the lender will look at before accepting your application. Your personal credit history and current financial situation will be assessed and if you aren’t a start-up, your business plan and accounts. Best check your credit rating in my Credit Reports section.
The benefits of a business loan
Cold, hard cash. However large or small a business is, you can get into situations where you’re short of cash. For a start up this could be getting your brilliant new idea off the ground, employing your first members of staff or decorating the company’s meditation room.
For larger companies, a business loan can help you to grow – for example, if you need to pay for a large, one-off expense, or expansion into bigger premises.
Different types of business loan
Government-backed start-up loans
Ideal if you’re starting up a business, and you’ll also get more support from your lender. Individuals can borrow from £500 up to £25,000, with a fixed interest rate. The only down side is that you may have to repay the loan within 5 years.
With a secured loan you’ll take out the loan against an asset, such as a house. If you fail to make the repayments, the lender can sell off the asset. Make sure you meditate carefully on this, as you could end up without a business and a home..
If you don’t have any assets you’ll have to take out an unsecured loan but you won’t be able to borrow anywhere near as much.
Starting a business from scratch can be daunting, but sometimes a loan can be the wise way to get things up and running. If you need some guidance in your quest, visit my Wisdom Section for more straightforward advice. My words of financial wisdom are like jewels scattered along the path to business glory.