Choosing the right business loan
There are a few different types of business loan that may be better or worse suited to certain companies, business models and funding requirements. Criteria such as credit history, the age of your company, the assets you own and the way you operate may influence your decision as to the type of loan or finance you pursue.
A secured loan uses collateral to reduce the risk to the loan provider, protecting the lender in the event the business defaults on repayments. Due to the reduced risk, lenders are often prepared to offer higher sums or offer a loan in circumstances where you have a weaker credit history.
An unsecured loan is offered based solely on financial integrity, business track record and risk assessment. This is particularly good for businesses without available assets to utilise as security and unable to access the necessary levels of funding through other forms of finance.
Because there is an increased risk to the lender, certain criteria often have to be met, such as the business’s directors being homeowners and having good credit history and credit scores.
A receivables loan is similar to a secured loan and is more commonly referred to as invoice finance. It allows businesses to raise money against the value of unpaid invoices, either individually or from the sales ledger as a whole.
Up to 90% of an invoice’s value is released within 24 hours of being raised, with the remainder forwarded once payment is received from the customer, less the lender’s fees.