There are many reasons as to why an established business might be able to benefit from funding. Startups may require specific types of loans to help get the business off the ground whilst established ventures are likely to have many more options available to them. For this reason it can be quite a confusing area to research, but we believe there are some easy to understand practices to help you navigate through the subject.
Types of Loan
The type of loan that is best suited to a particular business will depend on a number of factors. The industry a business is in, the size of the business and the reason for the loan can inform which type of loan may be relevant. We believe the main established business loans include:
- SME Loans
- Large Business Loans
- Secured Loans
SME (Small To Medium Sized Enterprises) loans have many similarities to loans sought out by larger businesses. The need to grow, for reinvestment and to cover the day-to-day running of the business are universal requirements for all ventures. Smaller entities, however, may need funding to be specified to their capabilities of repayments so lenders will generally structure their funding accordingly.
With small businesses, loans may be shorter, lower in value and at a fixed rate, in order to minimise risk, but well established businesses, even at the smaller end, may be able to take advantage of lower rates and fees as well as a broader range of funding options in general compared to startups.
Large Business Loans
Large businesses are typically those that are well-established so the loan market is catered favourably towards them. We observed that loan terms can be set for up to 30 years for the larger loan and interest can be set at variable or fixed rates.
While lengthier loan terms will almost always mean the overall amount paid in interest in higher, repayments can beset at a much more manageable level. It should be noted that some loans do employ early repayment penalties and should therefore be carefully considered before committing.
We believe another advantage over the not so well established business is the ability to access funding without “securing” the loan by putting up property, or other valuable assets, as liability. This can allow for greater peace of mind for the borrower while also breeding the confidence required for reinvestment. All loan terms should be read carefully, however, as not all unsecured loans are the same.
Variable Rates and Fixed Rates
Established businesses may also have the ability to choose between variable and fixed interest rates. This will take some consideration, however, as variable rates, those that change as the nationally set interest rate does, can work well in the short term if rates are low. If rates rise however, you could end up paying more.
We believe one thing is for sure, having the ability to choose is far more preferential than the options, or lack thereof, afforded to non-established borrowers.
Reasons for Seeking a Loan
Once a business becomes established, the reasons for seeking funding may change along with the opportunities that are presented to them. As previously mentioned, this may depend on a number of factors but we believe the most common include:
The ability to grow is essential to any business in any sector, and investment opportunities can often be the simplest method to achieve this. In retail, for example, larger stock purchases can cut down on supply costs enormously and trading in new types of stock is often a great way of increasing a customer base.
With the advent of the Internet, the ability for businesses of all shapes and sizes to trade internationally means that growth need not be restricted within a country’s borders. This may often, however, require some level of investment, typically regarding online payments and international transfers.
Commercial mortgages are some of the largest loans provided by financiers, particularly in expensive cities, but they can make an enormous difference to a business’s ability to grow. We believe the hospitality industry is one sector where an expansion can be vital to growth, with larger premises, for example, giving them the opportunity bring in further customers and create a space that is easily managed and a pleasant experience for their clientele.
As a commercial loan is such a high value loan, it can be a riskier commitment as failure to meet the terms and conditions can be disastrous. Again, it pays to research your options and the terms of the loan vigorously.
Restructuring a business can be a complex and painstaking process but one that can make a huge difference to both the day-to-day running of the business and making the venture profitable and sustainable.
Suitable loans may depend on many things as the restructuring can involve a previously mentioned commercial mortgage or be a simple streamlining of a small company to meet with the needs of contemporary business.
There are many funding providers in the UK to choose from and most are, thankfully, reputable. From the high street banks, with a myriad of options, to the online SME funding provider, there is a funding provider for many needs. For this reason, however, it can be difficult to know where to start, but with a little patience you are likely to find a loan to suit your needs. We believe the most reputable loan providers include:
- Lloyds Bank
- Barclays Bank
- Boost Capital
Lloyds are one of the largest banking entities in the world and have provided funding to UK businesses for centuries. Short and long term loans, small and large business loans, commercial mortgages and overdrafts are just a handful of options available to established UK businesses.
Like Lloyds, Barclays have been around for hundreds of years in one guise or another. With a variety of options, including alternative funding, credit cards and high value loans available, they remain one of the most popular funding providers in the UK.
At the other end of the scale, Boost Capital provide funding to SME businesses across a huge variety of industries. Flexibility is key to their funding model and support and advice from experts in the field makes them a highly regarded financier.