Business
05 Jan

A Guide On What Types Of Business Loans Are Available For Your Business

It's not easy to start a business, but the payoff can be tremendous. If you have the right idea and the right business plan, you'll find that you're able to make a living while doing something you love. Business loans are a vital financial tool for businesses of all sizes. However, small business owners often fail to realize the benefits of a business loan. It is because they lack the knowledge about how to get them. 

Business loans help your business grow. The key to getting these loans is finding the right lender. Finance Hub has been offering both secured loans and unsecured loans to small businesses for numerous years.

Let’s take a look at how many types of business loans are available in the UK. Also how they can help your business grow.

What Are Types of Business Loans?

In order to keep growing and maintain profitability, you'll likely need a business loan at some point. That's why it's so important to choose the right start-up loans or business loans for your business. Here are some of the main types of business loans and what they can do for your growth:

Working capital loans

Over the last decade, working capital loans have become very popular and efficient loans for small businesses. Many companies are using these loans to help fund their everyday operations, such as inventory purchases or purchasing office equipment. Working capital loans are a great way to start businesses with the flexibility they need while they manage the risk of business growth.  

There are two main reasons companies use working capital loans. The first reason is that they are relatively inexpensive to run because working capital loans are typically repaid in full. Secondly, they provide capital for businesses to expand and succeed, which enables them to grow. In the event that you find the loans useful to your business, you can consider them. 

Commercial mortgages

A commercial mortgage is a loan that people use to finance almost any type of real estate. In contrast, a residential mortgage is only available for the purchase of a residence or condominium. Commercial mortgages are usually longer-term loans and are available with various types of collateral like a car, boat, jewellery, artwork, or even stocks. 

The commercial mortgage market is a booming space with the potential to be a big part of our economy in the future. An advantage of getting a commercial mortgage is that the property you purchase will be an investment that has the potential to increase in value over time, making it a great long-term option.

Term loans

According to Wikipedia, a term loan is an unsecured loan, which is repaid in regular instalments over an agreed period of time. Term loans are short-term financing options that enable individuals to borrow money at a fixed rate of interest over a specific period of time. A term loan offers you flexibility and convenience. 

Among these types of business loans UK, companies raise long-term debt that is repaid in a series of instalments with a fixed or floating rate of interest. Term loans, however, are not being granted without sound financial statements and proof of creditworthiness.

Short-term loans

We all need money at some point in our lives. Whether it’s to pay a bill, finance a new purchase, or just to tide us over until payday, there are plenty of options available. There are times when you need to buy something but don’t have enough money for it. This can be due to many reasons such as a sudden emergency, bad investment decision, or just because you really need that product right now. 

However, these are just some of the situations when you may have to get a short-term loan - a kind of business loan in the UK. However, the question of how long you can use these loans is rarely answered. The short-term loan is a credit product with an interest rate that varies between 18% and 24%. The duration of the loan varies between 1 month and 12 months.

Peer-to-peer loans 

Peer-to-peer lending is a kind of lending that entails individuals or businesses lending money directly to each other without the involvement of a financial institution. A P2P lender would typically borrow money from a potential borrower using an online platform, such as a website. 

Fundraising that involves peer-to-peer involvement encourages supporters of a charity or non-profit to raise money as an individual. This is a form of crowdfunding. In place of having a single crowdfunding page where everyone contributes, they can have multiple personal crowdfunding pages with peer-to-peer fundraising that they can share with their network.

Understanding the difference between secured and unsecured loans

Knowing the difference between secured loans and unsecured loans is integral if you are considering getting a business loan in the UK. The term "secure loan" refers to a loan secured against any type of asset. This may include your house, car, or even your business. This means that if you default on the loan, they can repossess whatever property you own in order to recoup their money back. Secured loans are a popular way to get funds when you don’t have a large down payment. 

Unsecured loans are loans that do not require the applicant to put up any collateral as security. Unsecured loans are most likely to have higher interest rates, increased risks, increased costs, or increased fees. A credit card balance is an unsecured loan, but the loan is not secured by assets that the applicant owns, but by the outstanding debt owed by the applicant. Lenders looking for unsecured loans generally require fat down payments, qualify only the best types of credit, and can make borrowers meet stricter requirements.

Conclusion

To help your business grow, Finance Hub has been providing various types of business loans UK to all types of businesses. We have secured and unsecured loans for all types of businesses, so whether you're looking for a short-term cash injection or long-term funding solution, we can help! 

Our team of experts are always ready to answer any questions you may have about the business loans we offer. To learn more about the different options available for your business, please fill out our contact form. So we can provide you with more information about what will work best in your situation.