Large high street bank Barclays have provided funding options for businesses in the UK for over 300 years. With nearly 48m customers worldwide, they continue to be a major contributor to businesses in the UK and offer a variety of funding options, both business and personal.
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It is imperative for any 21st century financier to offer a broad range of loan options and Barclays manage this within the structure of their various loans and other funding options. While some companies may be deemed as too high a risk for them, something that has become more and more of a problem for borrowers after the financial crash of 2008, there may be a loan structure that can suit almost all needs, sectors and sizes of business.
- Small Flexible Business Finance
- Large Flexible Business Loans
- Business Overdrafts
- Commercial Mortgages
- Cashflow Finance
- Business Credit Cards
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As the name suggests, this is not a one size fits all package, rather a customisable loan that can be worth anything between £1,000 and £25,000. It can be spread out over 1 to 10 years and as such, the interest rates for it can differ greatly.
One of the advantages that this loan offers, subject to application, is the 6 month repayment “Holiday”, which essentially gives you up to 6 months before you are required to begin the loan repayments. Unlike many similar loan models, should your circumstances change and you wish to pay off the loan earlier than the terms describe, you will not incur an early repayment charge. This type of loan can be particularly useful to new businesses who need help getting off the ground.
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Although there are some similarities between the smaller version of this loan, described above, and the larger option, there are some significant differences that are not only related to the value of the loan, which has a minimum amount of £25,000.
The longevity of the loan can be as long as 20 years and as well as the fixed interest rate option available with the smaller loan, a variable rate is also offered. It should be noted that the fixed rate loan is only available for up to 10 years to minimise future losses for the bank.
The previously mentioned “Holiday” repayment, where you are not required to begin repaying the loan, is up to 2 years in length for the large flexible business loan, but interest rates will still be debited during this period. Because of the size of the loan, it will typically need to be secured, where something of equivalent value or more will be put up as collateral in case you are unable to meet its terms and conditions. It is therefore a riskier method for the borrower as it can lead to home or business property repossession.
As this type of loan provides a large amount of money that can be paid off over a longer period of time, it may be perfectly suited to well-established ventures that require large investment to reach their full potential.
One of the less risky loans that Barclays offer is the business overdraft, which is similar to an overdraft you may utilise in a personal account. A business overdraft is an evergreen loan, one that can be ongoing, which can be helpful because it can allow you to re-borrow as needed without the need to reapply. This method of funding can be fast, easy to arrange and convenient.
Interest is calculated on daily overdrawn balances, at an agreed margin over the Bank of England Base Rate and are only incurred as you use the overdraft itself, rather than it being an ongoing structured fee. Business overdrafts are arranged annually but can be renewed as needed. Although this means that it can be used in the long term, it may be better suited to companies who need options when encountering unforeseen expenditure.
Commercial mortgages can be used in two ways. Firstly they can allow a company to expand their business by purchasing new property, which might be more suitably located, larger - to encompass the ambition of the business or better equipped. Secondly it can allow the company to release the equity of an existing property and its value, and therefore potentially expand into other areas. This option is in effect a secured loan where the property is put up as security.
Commercial mortgages need to be at least of the value of £25,000 and have no set maximum limits. This will depend on the value of the property at hand. The option to pay only interest on the loan for the first 2 years can be of great benefit for some and the loan terms can be structured up to 25 years.
Fixed and variable interest rates are available, although fixed rates can only be accessed for the first 10 years.
It should be noted that if you do not keep up with the repayments, the bank could repossess the property, which in some cases can mean you lose your home. Most mortgage providers can earn more from the loan itself rather than repossession of property, however, some can offer advice to help you manage the repayments.
Cashflow Finance is essentially selling future profits to enable access to funds that may otherwise be forever caught in a loop of delayed invoices and payment clearance. These funds can then be used to invest in further commodities or to pay off what would otherwise be costly debts. There are essentially two methods of cashflow finance, invoice factoring and revenue advance loans, of which Barclays offers the former.
Invoice factoring is a method where you sell the value of an outstanding invoice to the factor, in this case Barclays. They will then provide up to 85% of its value within 24 hours. Once it has been paid in full, they will release the other 15%, minus a fee. Factoring also can allow a company to focus on the running of its business while the factor deals with the debt. What’s more, non-recourse factoring means the factor takes on the risk of bad debt, although this form is difficult to access for most.
Because of the nature of the loan, this is generally only available to well-established businesses with a turnover of over £100,000 per annum.
Another cash flow solution, although it is essentially an evergreen (ongoing) loan, is the business credit card. This can be an attractive option for small start ups and larger businesses alike as it provides funds for companies with a turnover of anything over £10,000 per annum.
A disadvantage to using credit cards of any type is they can be extremely expensive, Barclays variable rate is over 26%, meaning debts can add up quickly and cripple even a well functioning business.
Despite this there are several advantages to using the Barclays Business Credit Card, including 0% on purchases within the first 6 months of the contract, 56 days interest free when the monthly fee is paid back in full and on time and 90 day protection on goods over £60.
Credit cards are possibly the most expensive method of loans and as such may only really be suitable as a short term method of finance.
Barclays also offer a range of personal loans that are, to some degree, similar to those offered to businesses. Overdrafts over £15,000 have a set-up fee of 1.5%. The size of your overdraft may depend on your ability to cover the debt, and a buffer is offered on smaller and shorter overdrafts, meaning you may pay little or no interest.
Homeowner loans are secured loans where your property is put up as security against funds of up to £250,000. You should think carefully before committing to any secure loan as the risk can outweigh the benefits.
Short term personal loans can be as high as £50,000 and spread out over a period of 2 to 5 years. Interest rates range from just under 5% to over 20%, so you should discuss the most affordable option for you with the loan provider.