Loan (Value between £1,000 and £5M)
A business loan is a credit, usually in the form of cash, that you borrow and repay over an agreed length of time. Banks and alternative funding sources, such as community development finance institutions, crowdfunding platforms and even friends and family can provide businesses with loans.
In addition to repaying the amount you are borrowing, you will need to pay interest subject to the following considerations:
- the length of the loan
- the total amount you borrow
- whether the loan is ‘secured’ – e.g. if you own your home and agree to transfer ownership to the loan provider if you don’t keep up your payments
The interest rate can either be fixed for the duration of the loan or can be variable, meaning it will change subject to other factors, for example, the Bank of England base rate.
Advantages of a business loan
Advantages include:
- unlike overdrafts, loans are not repayable on demand – this means you can plan ahead more reliably for the whole term (often between 1 and 5 years)
- loans can be tied in with the lifetime of the equipment or other assets you are looking to purchase with the amount you are borrowing
- you won’t have to give the lender a percentage of your profits or a share in your company
Disadvantages of a business loan
Disadvantages include:
· loans are usually not very flexible – e.g. you may have to pay additional charges if you repay early
· you might struggle to meet monthly payments if your customers don’t pay you
· if your loan is secured against your personal property or assets (e.g. your home) you could lose them if you don’t keep up the payments
· the cost of repayments for variable rate loans can change, making it harder to plan your finances
If you would like to know more about how Excel TM Group and Jet Funding can help you with obtaining Asset Finance then feel free to contact us.
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