Whether you’re funding a start-up, expanding or trying to inject much needed cashflow, borrowing for business purposes is not an easy task. To confirm this, the Bank of England reported in March this year that many banks have an aversion to lending to small businesses.
Despite the introduction of the government’s National Loan Guarantee Scheme (NLGS), it seems that strict lending criteria has not been relaxed. This has been confirmed by participants in the scheme RBS, Santander and Barclays.
The good news is that there are other options when it comes to financing your business through loans. To make sure that you choose the right finance option for your needs, consider all of the following:
Bank Business Loans
Taking a bank business loan means that you can control how much you borrow and how long you pay it back over. You’ll have fixed repayments (easier to budget for) and you won’t be giving away an interest in your business.
The difficulty is in bank’s willingness to lend to small businesses. Remember that repeated applications to lenders can damage your credit rating, so if you’re turned down once, try to find out why. A copy of your Experian credit report can be useful.
Before you approach a bank for a business loan, first check out the best products available at comparison websites moneysupermarket and compare the market.
Business Credit Card or Overdraft
When it’s a short term solution that’s required, consider using a business credit card or overdraft. These are usually high interest options however so should only be used in the very short term.
Many businesses have cashflow issues whereby invoices that are owed to them take time to be paid. If you want to free up some funds a new wave of invoice financing products are available on the market.
Some big banks, including RBS, are offering invoice finance and, although you will pay a fee for using the service, it can be worthwhile if you need to free up cash fast.
Other options for funding your business include government grants, borrowing from family or friends or finding an angel investor – all of which have their individual pros and cons.
Weigh up your options carefully when you need to borrow for your business and make sure that you choose the best business loans for you.
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