If you’re thinking about buying or starting a business and your funding choice is a loan, you need to start preparing. Getting a small business loan in the UK is very common for those wanting to start their own business, or buy a small business, with a number of lenders available to pick from.
Checking your eligibility before applying for a small business loan, and researching all of the available lenders is key – putting your best foot forward for funding. These loans are best suited to small businesses and sole traders and the money must be used for business, not personal reasons.
Read our guide on small business loans in the UK…
Check Your Eligibility
Before applying for a small business loan, you should have an idea about whether or not you’re eligible and how much you could lend. Although it differs from lender to lender, there are a couple of key points that you should consider before applying for a loan…
- Should be over the age of 18
- Have a good credit score
- Need the loan for business, not personal use
- Prove that your business can make repayments on time
- Details of previous loans
In the UK, there are a number of lenders that offer small business loans – thorough research will give you the upper hand when applying for one. Some lenders may offer lower interest rates, some may only offer a limited budget, so it’s best to take a look through a handful of lenders to make an educated decision.
The average small business loan is between 1,000 to 50,000 and APR may differ. You can use a comparison website like MoneySuperMarket or GoCompare to help you compare lenders while assessing their rates, terms and eligibility criteria.
Apply for a Loan
The application process for a small business loan differs from lender to lender, much like the eligibility criteria, however, there are a few simple steps that are common across the board of lenders.
Lenders usually ask about how much you want to borrow, over what period of time and what the loan is for. Afterwards, the lender will assess your application and run a credit assessment, which will then lead them to a decision about what you can borrow.
If your application isn’t successful – don’t be discouraged. There are other options available which may be a better fit for you.
Things to Take Into Consideration
There are a number of other things you may want to take into consideration before applying for a loan, that will better your chances of being accepted.
Having a clear business plan will show the lender that you have thought about your business development opportunities and how to use the loan, making you a reliable business owner and loan candidate.
Additionally, having a good credit score will definitely better your chances of being accepted for a loan – this will assess your riskiness as a borrower. A good credit score shows that you are reliable, have great money management skills and are more likely to pay your loan back on time.
If you have any difficulty getting approved for a small business loan from a traditional lender, there are a number of alternative lenders that may be able to help. These lenders may be more willing to lend to businesses with bad credit or no credit history. However, they may also charge higher interest rates.
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