How to Get a Business Loan

One of the most common forms of commercial finance, traditional business loans are commonly used by start-ups, as well as more established businesses looking to gain capital or improve their cashflow.

Business loans provide firms with access to larger sums of money that may be difficult to come by otherwise. These funds can then be used to fuel expansion, cover short-term operational costs or purchase expensive business assets.

There are a number of factors at play when it comes to applying for this form of finance – so, find out how to get a business loan with Anglo Scottish.

What is a business loan?

A business loan refers to a sum of money borrowed by a business from an external lender. Traditionally, the only lenders available were large banking establishments. However, in recent years, a number of alternative lenders have made it easier for businesses to access the funding they need.

Business loans can be used for a number of different purposes, from business growth and expansion to meeting short-term costs and activities such as R&D, recruitment and more.

By applying for a business loan, your business can unlock opportunities that would have been impossible to access with internal capital only.

Therefore, if your business has valuable assets that you are willing to use as collateral, a secured loan could offer better lending terms.

Meanwhile, unsecured loans do not involve collateral. Instead, they rely on a business’s creditworthiness or business performance as indicators that the loan will be repaid.

As well as business loans, there are a number of other facilities available for businesses looking to secure funding – these vary from short-term solutions, such as invoice finance and bridging finance, to longer-term funding sources, like commercial mortgages.

If your business is looking to secure funding that will be used for the purchase of a specific asset, then asset finance may be better-suited to your needs. Anglo-Scottish offers a number of dedicated asset finance options, particularly if you operate within a specific sector.

Pros and cons

Business loans offer a number of associated advantages and drawbacks – they may be well-suited to certain businesses but not to others, depending on your circumstances and goals.

Pros of a business loan

• Provides instant capital for start-ups that may be short on cash.
• Can be used to fund expansion plans and projects.
• May be available without collateral.
• Does not dilute control of your business, unlike other forms of funding that may sacrifice control.

Cons of a business loan

• Stricter lending criteria than some other forms of finance.
• Monthly repayments will impact cashflow until your debt is repaid.

Often, businesses look to expand too quickly and find themselves hamstrung by expensive monthly repayments for business loans. Your business must retain some flexibility in order to accommodate potential unseen costs – do not let your monthly repayments cause financial difficulty.

Important documents

When preparing to get a start-up loan or a general business loan, lenders are likely to ask for documentation. Having these documents to hand can help expedite your loan application process.

These are likely to include:

• Business bank statements
• Business tax returns
• Legal documents
• Proof of address
• ID of business owners
• Financial forecasts
• Assets that could be used as security for the loan
• A business plan.

Alternatives to business loans

There are a number of other commercial alternatives to a business loan that could support start-ups or more established businesses. Each of these methods give your business the opportunity to access external means of funding, or explore new lines of credit, to support a more consistent cash flow.

Business credit cards could give your business the ability to spread the repayment schedule of larger purchases. Facilities such as a business overdraft could also give your business the opportunity to spend outside of your means for an agreed-upon period, knowing that you will have enough money in the future to pay off the overdraft.

If your business commonly takes payment via a card provider, it can take a little while to get the funding you need. Merchant Card Advances can be used to help bridge this gap, combatting any inconsistent cash flow issues you might have.

Get in touch

Unsure about whether a business loan is right for you? Still looking for more information on how to apply for a start-up loan?

Our expert team are on hand to guide you through the business loan application process. Get in touch today to discuss your unique requirements or simply find out more about how Anglo Scottish can support you.