A business loan is the umbrella term for the loan options available for SMEs.
Alongside invoice finance and asset finance, there are plenty of types of business loan products. Funding Bay work with lenders who offer secured loans, unsecured loans, merchant cash advances, revolving credit facilities and bridging loans; to name just a few.
A merchant cash advance (MCA) is a type of unsecured, short-term business finance. It is an innovative loan product that uses your card terminal and its’ receipts to secure lending. It has proven popular with certain sectors such as retail, restaurants, and general leisure. It is designed to help businesses gain access to their cash in a flexible way as repayments are taken as a proportion of revenue. Any businesses that use a credit card terminal will benefit from a merchant cash advance, which also tend to be easier to obtain than other forms of business financing.
Revolving credit facilities (RCFs) are flexible funding solutions that work like a business overdraft. Your business will be set up with a pre-agreed funding limit with a lender over a set duration. During this time, you can draw down and repay the funds you need within this limit, only paying for what you have drawn. This process can be repeated throughout the agreed loan duration, hence ‘revolving’. The security required depends on the lender. Some RCFs can be secured against the debtor book. Some simply require a personal guarantee with no charge over the business.
Bridging loans are short-term secured loans, traditionally associated with ‘bridging the gap’ between buying a new property and selling an old one. They are often used by property developers to bridge the gap between the purchase of a property and organising longer-term finance like a mortgage.
Development finance is a funding option used to build, convert or refurbish residential or commercial property. It is often used to pay for the purchase and construction costs of a project.
Secured business loans are a way for companies to secure funding by using assets as security. Since lenders typically use high-value assets such as property to secure loans, it means they can lend more in comparison to unsecured business loans. Because the lenders are using assets to secure the loan, often they won’t need to scrutinize personal or business credit as vigorously as they might for an unsecured loan. Further, given the lending is collateralized, the pricing is likely to be lower if the business is able to put up tangible security.
Unsecured business loans allow businesses to borrow money without offering collateral. In contrast to a secured loan, there are no specific assets offered as security in case of default. Interest rates tend to be slightly higher for unsecured vs secured as an exchange for the higher risk taken on by the lender. Traditional banks and new fintech lenders both offer unsecured loans, typically over 1-6 year terms.
There are many different types of business loans, which work to specifically help different situations and industries.
The traditional concept of a business loan will include borrowing money and then setting a repayment agreement with the lender that suits you best.
A loan is usually repaid in regular payments over a set period of time, with an agreed interest rate. The repayment time usually lasts between one and five years, but in some cases, they can be repaid over 10,15 or even 20 year terms.
The main benefit is the increase of working capital. A business loan allows you to maintain your operating cash flow so that you can cover unexpected expenses. It also makes things easier when you are seeking to pay your everyday bills, such as utilities, salaries and rent, and can provide a welcome boost during any periods when business volumes are lower. Once you’ve improved your working capital, you might be able to purchase stock, or take on new staff, or seek a major new contract, or even negotiate lower prices with certain suppliers
With a selection of lenders that specialise for various sectors, business loans offer a wide variety. These include short-term loans, longer term loans, loans specifically designed for small businesses or for start-ups, equipment finance and merchant cash advances.
There is a quick turnaround with most business loan facilities. You should hopefully be able to get a decision on your application within a few working days.
Unlike borrowing equity, a business loan from a lender provides you with full control of your business. You retain full control and management of your business. There’s no need to hand over control to investors, as would be the case with an equity finance arrangement. These investors would then be likely to demand a share of your future profit, but debt financing allows you to avoid all of this. The only other party involved in the business loan would be the lender, but they won’t interfere with the running of your business in any way.
Hire purchase and leasing are both financing options available to businesses and individuals in the United Kingdom. There are a number of key differences between the two options that should be considered before making a decision.
Simply speaking, a drawdown facility is a type of business loan. However, instead of receiving the loan amount as a single lump sum at the
A revolving credit facility is a loan facility that enables you to withdraw money, use it, repay it, and then withdraw more money. As the
Funding Bay Limited is an FCA authorised and regulated finance broker, Reg No. 950847. Funding Bay Limited may receive payment(s) or other benefit from the finance provider if you decide to enter into an agreement with them.
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