A business loan is any kind of loan offered to a commercial entity as opposed to an individual. Business loans typically range from as little as £1,000 to in excess of several million. Repayment terms will vary from one month to fifteen years, depending on the lender and the type of loan.

Business loan rates will vary depending on a multitude of factors, from the length and size of your loan, right through to your business’s financial position. There are a variety of different commercial loans currently available to UK businesses and selecting which one is right for your needs can be tricky. These range from short to long-term loans and can be either secured or unsecured.


Secured business loans

You will need to use an asset from your balance sheet as a guarantee for these loans. Usually, property is used as security, although assets like stocks and shares can also be used.


Unsecured business loans

This allows you to borrow without using any business assets as security. Usually, you will provide a personal guarantee that says you will pay back the loan yourself if the business is unable to. Unsecured loans typically have higher interest rates than secured loans.


What can a business loan be used for?

Business loans can be used for pretty much anything you need them for. You can use a business loan to help fund the purchase of premises, buy stock, or cover ongoing running costs, for example. You could also use a business loan to fund a start-up company if you do not expect to bring in any revenue for the first few months. Equally, you could be a well-established business encountering a short-term and temporary cash flow problem, needing funding to tide you over.

At all times, you need to be aware of what a loan will cost you both in the short and long term. You need to be aware of the rates associated with your loan and the consequences you will face if you cannot make repayments.


Benefits of business loans