NatWest Business Loans Explained

NatWest has existed in its current guise since 1968, when two banks, The National Provincial Bank and The Westminster Bank, merged. This allowed the new entity to become one of the most innovative on the high street, a model that also informs the many options they offer in regards to business loans today. With asset finance, small and large business loans and funding schemes on offer, they have options that can suit a variety of funding needs, both large and small.

Loans on offer

Even when compared to other huge high street banks, we believe NatWest offer a terrific range of funding options, the sheer variety of which covers just about every funding need.

These include:

• Small Business Loans
• Fixed Rate Business Loans
• Business Overdrafts
• Business Credit Cards
• Funds And Schemes
• Commercial Mortgages
• Asset and Invoice Financing

Small business loans

The NatWest small business loan is designed to help small businesses and startups expand and reach their full potential. The structure of the loan is pretty simple, anything between £1,000 and £25,000 is standard for high street loans, and can be spread over 1 to 10 years.

On the down side the interest rate is quite high, at over 7%, but there are some advantages to the NatWest small business loan, including no arrangement fees, which can be quite costly with other providers.

Fixed rate business loan

This is essentially a larger business loan that offers funds of over £25,000, a maximum of £500,000 is available. As with most long term business loans, interest rates will change enormously depending on the loan’s value and terms and conditions of the contract.

One possible advantage of this loan is the availability of fixed interest rates over the long term, meaning you know the exact amount you will be repaying each month. This in turn offers some degree of peace of mind, something that is not always available when compared to other high street loans, where variable rates are fairly typical.

Much like the small business loan there are no arrangement fees. There is a major advantage in that there is no early repayment charge, meaning you can structure your loan as your circumstances change, offering a high level of flexibility that can be highly advantageous.

Business overdrafts

Business overdrafts are much like the overdraft that you would utilise with personal bank account and comes under the umbrella of an evergreen loan, one which is ongoing and has no specific repayment structure. It can also allow you to re-borrow without the need to reapply for extra funds.

This can be helpful for companies that require some leeway in the running of the business, allowing for unexpected charges and expenses and you only pay interest on the parts of the overdraft you access.

This is not to say that it is the most cost-efficient method of borrowing, however, as the longer the debt lasts, the higher the interest rates as well as arrangement fees, which need to be renewed annually.

Business credit cards

NatWest offers various banking cards for business, including credit cards, debit cards and online credit cards. All credit cards offer the convenience of quick payment but they can be hugely costly, especially if you have difficulty paying back the debt.

As costs can spiral you should think carefully before using a credit card as the interest rates can exceed 20%, 16.9% on all purchases with NatWest, but they do provide a wealth of information on your credit card spending to help you keep track of expenses. There is also a 45 day interest free period if you stay on top of the debt, but this should also be weighed up against the annual card charge, which is £32, as well as other default fees.

Funds and schemes

NatWest have become one of the pioneers in helping startups and small businesses to access funds they would otherwise be deemed unsuitable for. There are 3 main funds and schemes, all of which are government backed, the most relevant being The Enterprise Finance Guarantee Scheme.

The Enterprise Finance Guarantee Scheme is designed to help businesses who do not have the security, which is essentially valuable assets, to secure a loan. Funds of anywhere between £25,500 and £1.2m are made available and repayment terms can be set for as long as 10 years.

Commercial mortgages

There are two types of commercial mortgage, the borrowing of funds to purchase new premises, usually for reasons of location or size, or the remortgaging of existing properties to access funds in order to invest in other parts of the business.

The minimum value of the mortgage is set by NatWest at £25,000, but in theory it has no maximum as this will depend on the value of the borrower’s assets. Repayments can be spread over the course of 25 years while fixed and variable rates can be implemented on the loan. This is a highly flexible loan, but is only suitable for those with sizeable assets to begin with.

Asset and invoice financing

Asset financing is a little like commercial remortgaging in that it is a secure loan, one that puts up your property as security. This tends to be suitable for businesses that wish to access more expensive equipment to help the business become more efficient and profitable.

Invoice factoring is a method of selling future profits, in this case unpaid invoices owed to your company, in order to free up cash flow. There are two variants of invoice factoring, non-recourse, which is where the factor (lender) takes on the responsibility of bad debt and recourse factoring.

NatWest can pay up to 90% of the value of the invoice within 24 hours of the application. The following 15% will then be paid, minus fees and charges, upon the payment of the invoice from your client.

Other loan types

NatWest also offer a variety of personal loans, some of which mirror the business models. Personal loans range from £1,000 to £25,000 and can be paid back over the course of 7 years, depending on the amount and circumstances. Interest rates are typically between 5% and 7% although loans as low as £1,000 can incur charges of up to 24.90% in the short term.

Home improvement and car loans are also available, as are holiday loans and debt consolidation, which can charge interest rates as low as 4.9%.