How To Find The Right Type Of Loan For Your Business


Running a business can be a costly affair, particularly if you want to expand up and out and grow your small business into something substantial. Securing funding to do exactly that can be notoriously difficult but thankfully, the finance industry has come through in recent years more than most. With the ability to secure and compare business loans online, business owners are being given accessibility like never before – but how can you determine the right kind of loan for your business? We’re exploring exactly that, below.

Understand The Types Of Loans Available

To work out which loan is best for your business, you first have to understand just what’s out there on the market for you to choose between:

  • Working Capital Loans – Working capital loans work a little like an overdraft in that businesses can borrow an amount and only pay back what was spent. These are ideal for companies needing a bit of extra cash flow during a slow period or at off-season times to cover wages and owed accounts.
  • Commercial Mortgages For a company looking to purchase premises, renovate their own or purchase property to rent on to other business, commercial mortgages are ideal. These are often larger amounts of around $25,000 or more depending on the lender and are paid back over a longer period of time.
  • Bridging Loans Bridging loans are also typically used for property-related spending, but are only designed to bridge financial gaps and are therefore often only short-term. These loans can be used for other business-related activities, however.
  • Business Loans Business loans can be secured or unsecured and are often for smaller amounts for short periods of time. Lenders will offer the given sum with competitive APR rates and varying repayment periods depending on your business turnover and your needs.
  • Cash Advance If you work with card machines or invoices, you may be able to use these to gain an advance loan. Some lenders will allow you to claim up to 100% of your expected income.

Secured Or Unsecured?

Secured or unsecured loans both have their benefits and limitations. Secured loans are more commonly found for businesses that have assets to spare. This includes business premises, machinery and other high-value items and can also include personal property in some cases. The loan is secured on these items so if repayments are missed, they may be repossessed to cover the remaining loan balance.

Unsecured loans do not require any assets, so put the risk in the hands of the lender. While this can often mean higher interest rates or stricter repayment periods, this option could be ideal for smaller businesses without any assets to use or who may be hesitant to risk what they do have.

What Does Your Business Need?

Determining which loan is best will ultimately depend on what you need from the money you’re borrowing. Is it going to be a short term solution to tide you over until the next round of income, or are you looking to take advantage of an upcoming investment opportunity? Small businesses that need a bit of extra cash to help them grow could benefit from business loans or a cash advance, while a company looking to expand to a new building or invest in property will benefit from commercial mortgages or bridging loans.

The ideal loan for you ultimately comes down to what your business needs and only you can truly determine this. Hopefully, this guide has given you an insight into the loans available so you can better compare and decide on your next business loan.