Types of Short-Term Loans for UK Businesses & Advice on Borrowing
It doesn’t matter whether you’re trying to free up fund and increase cash flow or trying to expand your business, short-term loans can either help you or hurt depending on how much you understand them. To be eligible for one of these short-term business loans, you have to have been running your business for 18 months and actively trading. You also need earn at least £80,000 a year. Short-term business loans can help you take out finances for your business and can last anywhere from 3 months to a year. At the end of the period you have to have your full balance and interest paid off. Read on to find out how you can take out a loan and how to pay it back in time.
While you can obtain anywhere from £1,000 and £1 million, what you can borrow depends on your business’ financial health, the lender you’re borrowing from, the reason you’re taking out the loan, and what you will be spending on. The yearly interest will vary depending on the lender and your type of business, but it can range anywhere from 5 to ten percent. Most providers charge interest on the high end of things.
Choosing the Right Business Loan
According to the site MoneyPug, which is widely used to find the best short-term loans, if you keep the amount of money you borrow to a minimum, you will pay less interest in the long-run. It is also possible to extend the loan if you need to. It’s also a good idea to know where you stand on interest rates. Decide what you can afford early on and how long it will take you to pay it back. The earlier the better, but you can also give yourself extra time to cover unforeseen circumstances. Finally, applications may come with fees and will likely affect your credit score. Research loans and find the one that will work for you in the long run.
Types of Loans Available to You
There are many different types of loans, but you should find the one that is best for you and your situation. First, term loans are the most common. They work a lot like personal loans. You agree to terms with the lender and pay a balance off with a fixed interest rate. You also have the option for asset finances, meaning that a loan is given to buy or replace equipment for your business. This could include basic office equipment and more expensive things like computers, tech gear, machinery, and vehicles.
Another option is invoice financing, where a bank or another lender lets your borrow based on your unpaid invoices. They will either cover the whole invoice or a percentage based on a service charge. The last loan that is common is a traditional line of credit, which can help you access funds and improve cash flow and helping you cover unforeseen expenses.
When you are going to take out a loan, you should make sure it is necessary. Since these loans are easier to obtain, many businesses will take them out when they don’t actually need them. Take out a short-term business loan when you absolutely need it. You should keep track of your due dates and pay your payments on time. Interest will be higher if you pay the loan back more slowly. Loans should be taken out for unexpected situations, not for routine expenses. You should familiarize yourself with the terms and conditions and be ready for what is coming. Only borrow what you can pay back on time. Keep your budget in check and do what you need to with your loan.
Whether you are a big business or small start-up, you can get many benefits from it. The key is to understand what you are getting into and know what your loan will be your way to expand your business and pay for unexpected expenses. Show due diligence and you will get to know what loan is best for you and your business. Don’t let it control you, do it right and bolster your business.