Small business loans

Small Business Loans – An Invaluable Lifeline for SMEs

For any business to thrive, many things need to fall into place. From having a spot-on, reliable revenue model to making sure that you maintain the quality of the products or services you’re offering, these things differ in scope, importance and urgency. Keeping a healthy balance sheet is perhaps the most important among these.

But it’s not always feasible to stay in the ‘green’ zone of profits. For various reasons, businesses do tend to run short of liquid capital. While reinvesting in newer ideas becomes a far-fetched proposition in such cases, even settling the routine, daily accounts can become tough. This is more evident for small and medium-sized businesses (SMEs).

Small business loans aim to help businesses facing these troubles.

What is a Small Business Loan?

A small business loan is a specialty business loan that aims to address the requirements of small businesses. It is usually a short to medium term loan that carries lower interest rates than other comparable funding products.

Why Small Business Loans?

Small businesses are difficult to finance. If you’re running one of your own, you probably already have experienced this first hand. These days, the traditional High Street Banks and other mainstream, institutional lenders tend to steer clear of lending to small businesses. This is simply because the costs involved in the processing of such loans are just the same as those associated with larger, more profitable loans.

Much the reason why, small businesses now have to completely depend on alternative sources of financing. Peer-to-peer lenders and credit societies are good examples of such sources. Businesses usually feel the need to take a small business loan in order to:

• Quickly access funds
• Temporarily fix cashflow problems
• Pay for one-off purchases
• Finance large orders
• Settle dues or overturn tax liabilities
• Invest in time-sensitive market opportunities
• Hire assets

Features of Small Business Loans

Small business loans constitute a subset of business loans. Some of the defining features of these loans are:

Fast Processing

Most small business loans are unsecured loans. So, it only takes a few credit checks for the lender to decide whether to accept or reject an application. Every small business loan application received by us is responded to within 24 hours. Moreover, since there’s no need to fix the value of securities, the funds become available to the borrower within typically just a few business days.

The process, however, can take longer if the small business loan you’re taking is a secured loan.

Adequate Loan Amount

Small business loans can help businesses raise enough money to fund expensive purchases. Businesses can typically borrow up to £150,000 as an unsecured small business loan. This amount can go as high as £1,000,000 if your business can provide an asset as collateral.

Loan Term

Small business loans offer great flexibility as far as loan terms are concerned. A wide repayment window of 6 months to 5 years is usually the norm, depending upon the size of the loan and the repayment potential of the borrower.

Small Business Loans vs Credit Cards/Overdrafts

It’s a common practice for small business owners and managers to use their personal credit to finance business operations. This, while reasonable during the early years of operation, is not the best way to go about financing a business. Please visit this page to read more about the advantages that business loans carry over personal loans.
The same line of thoughts extends to the comparison between small business loans and other forms of credit such as credit cards or bank overdrafts. Even though it may be more tempting to avail quick credit, it’s worth noting that small business loans are almost always cheaper, more flexible and easier to settle.