Business Loans UK

By: EconomyWatch Content   Date: 25 November 2009

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Business loansare loans offered to firms as a means to fund their business objectives, such as additional capital expenditures, new ventures and consolidating existing debts. The repayment schedules are flexible and a business can opt for variable or fixed interest rates.

 

Types of Commercial Business Loans UK

There are several types of business loans. The main types of business loans are:

Invoice Finance: Invoices are among the most important and the largest assets of companies that have a turnover of less than £5 million. A business can use unpaid invoices to draw advances. Moreover, invoices can release substantial volumes of cash on a balance sheet. Lenders prefer offering invoice finance because it is considered a secured business loan.

Trade Finance: You can opt for trade finance in a situation where you have to buy goods before you resell them with a mark up price and realize profits. You can use this option if you need to import raw goods that will be processed with an intention to be resold.

Balance Sheet Funding: In the balance sheet funding option, the lender reviews all the assets on a company’s balance sheet and fixes individual loan-to-value ratios and interest rates on various assets. In this funding, all the cash in the balance sheet is pooled together and the loan is lent against it. It is also called ABL or Asset Based Lending.

Asset Finance: A business can opt for asset financing option if it requires cash to acquire assets or for funding capital expenditure. A company can use this financing option to either rent or buy assets. A business can also get loans for ongoing repair and maintenance, if the assets it is buying or renting are bespoke machinery.

Business Loans UK - Important Tip

A bank may not accept your proposal if your business is young, or you do not have the required net worth or assets. You will be able to get business loans easily if you have a well-written business proposal and clear business ideas. You can approach institutions, such as the UK Department of Trade and Industry to get business loans for your startup business. Moreover, the UK government offers free business loans advice through its advisory body, Business Link. You can meet the local advisors of Business Link and get the required information and advice.


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