Updated: 31st August 2021
A business loan is not dissimilar to a personal loan you may take out as an individual. In both cases you will be given a lump sum of cash by your chosen lender, and you will then begin to make a series of monthly repayments until the balance, plus any associated fees and interest, are repaid in full.
Taking out a commercial loan can be just what your company needs to purchase new equipment or machinery, increase holding stock, or commence a growth or expansion project. As you will be given the loan in one lump sum, your working capital will not be affected in the same way as if you financed a new purchase or project using retained earnings.
Interest will be charged on a business loan from the moment you receive the cash, until you have made the final instalment on the borrowing. Interest rates are typically fixed for the life of the loan which makes it easier for you to budget for the repayment, however, interest rates on commercial loans can be high depending on your company’s position.
It is likely that a lender will want you to provide some form of security to underpin the loan in the event of non-repayment. In many cases this will involve you providing a personal guarantee. While your company will remain responsible for repaying the loan, should it be unable to do so at any point, the onus for this will fall to yourself. Should this happen, you will be required to use your personal funds to service the business’s loan; failure to do this could see you facing further action which could, worst case scenario, include personal bankruptcy.
Business loans can be a powerful tool when it comes to launching or growing a company; however, it is important you understand the potential downsides too. If you are looking to finance your company through a business loan, our specialist team of commercial funding experts are here to help. We can talk you through the options available to you and your company, and ensure you understand the pros and cons of each.
Through our years’ experience, we have built up an enviable network of professional relationship with the UK’s biggest banks, as well as smaller more niche lenders. We can harness the power in these relationships to secure you a loan quickly and easily, and at the best rate possible. Speak to one of our advisers today on 0800 063 9251 to understand whether a commercial loan could be the right way to fund your venture.