Compare business loans
Businesses considering funding should compare business loans to get the best deal. Business owners looking for a new source of funding can save money by comparing business loans under the following criteria: interest rates, security, term length, speed, and flexibility.
Compare business loans
Interest rates
The first loan comparison criteria that you should look at is interest rates, however, bear in mind that interest rates are just one piece of the pie and the term, flexibility, setup fees etc will drive up the total cost of a loan. In some cases, it is even prudent to choose a business loan with a higher interest rate when the other criteria are favourable. Indeed, the term length and monthly repayment amount are probably more important considerations for the total cost of capital.
Why not try this handy business loan calculator to see how much a typical loan will cost. Simply enter the amount you wish to borrow, the quoted annual interest rates, and the term length. The calculations are indicative and intended as a guide only and are based on the average rates for a low-risk business. The interest rate will vary depending on the type of business loan, some of which we will cover later in this article.
Security
When you begin your search for new funding options you will quickly realise that the level of risk your business poses to a lender will have a significant impact on the amount that you will be charged and the level of security that you will be required to offer in return. A young business looking for a startup loan or a business with bad credit will find it difficult to get a large unsecured loan without offering valuable assets as security including a personal guarantee.
Similarly, businesses with a short trading history and, or, low turnover might be better suited to invoice finance or a merchant cash advance rather than having to offer up security to access a secured loan. It’s worth touching up on the main differences between a secured and unsecured business loan.
Term length
Whether you are looking for working capital funding, to supplement cash flow, or something more long-term, the length of time that you can repay the loan is an important consideration. Mostly, the longer the term and the bigger the amount borrowed, the more interest you’ll end up paying. It’s often worth considering a short-term loan, and then, if necessary, you can apply for an additional lending facility in due course.
It can be worthwhile seeing which lending thresholds different lenders offer as the difference, for example, between £20,000 and £30,000 can be substantial. You might be better off getting a £20,000 loan followed by a £10,000 loan at a later date. This might seem like a lot of work to contact different lenders and compare their lending thresholds and term lengths, so it might save you a bit of time to use a lending platform or a credit broker.
Speed
There are lenders in the market that can supply cash within 24 hours if you have all of the required documentation ready to go. But when comparing business loans you should ask directly how long it will take for your credit facility to reach your bank account.
Factors that affect the speed of approval:
Type of lender
Type of business loan
The financial health of your business
Credit history
Flexibility
Funding Options by Tide has a panel of 120+ lenders who can help compare and choose the right loan for your business. If your business has been adversely affected by the pandemic, you can apply for alternative funding to help your business. Have you experienced the relative inflexibility of business loans offered by high street banks? In many cases, traditional lenders are slower than new business loan companies. From our experience, larger loans with longer terms take longer to arrange and secured loans can be slower to set up than unsecured loans. We’ve seen merchant cash advances and small business loans arranged within 24 hours, and with the broad range of different types of loans on offer at the moment, you can navigate the often inflexible lending market.
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Types of business loans
Unsecured business loans
For most business owners, the following four types of business loans will work, and the best option will depend on your trading history, balance sheet assets, and cash flow position.
Secured business loans
A business with a demonstrable trading history and asset-heavy balance sheet might favour a secured business loan.
Working capital loan
An additional loan that business owners can apply for is a working capital loan. This is helpful to cover unexpected cash flow gaps or unexpected expenses, for example, if a machine breaks down. We recommend that you try to find a lender that can offer you the best effective annual interest rate for this short-term loan. You can use a lending platform to quickly compare different lenders’ APRs.
Revolving credit facility
A revolving credit facility allow a small business to withdraw money and you can repay it, then withdraw money again without the need to apply again for a new lending facility. This makes it one of the most flexible funding options available to business owners. This is often used in place of a business credit card, but it might be handy to have both.
How much can you afford to borrow?
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
Want to understand the cost of your loan?
Use our business loan calculator below to find out how much you can borrow to take your business to the next level.
Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
Monthly payments
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Monthly interest
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Total interest
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Length of loan
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Total cost of loan
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Financial product information
Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
Understanding unsecured business loans
What is it?
An unsecured business loan offers business owners who need a quick source of cash, but who don’t have valuable assets to use as collateral, a chance to get a loan without the bureaucratic delays concomitant with securities. The market is not experiencing a level of competitiveness not seen before, with great deals on offer. A business owner can secure an unsecured business loan of up to £250,000 and this can be approved in just a couple of days. One of the main advantages of an unsecured business loan is that you won’t require any security.
Benefits
More flexibility than secured loans. Access to faster cash for your business. No need to put forward valuable assets. No personal guarantee. Multi-purpose loans are possible. In comparison to secured loans which are usually fixed, and can only be used for a fixed purpose the purchase of a commercial vehicle.
Examples
Working capital finance offers businesses a chance to cover quiet trading periods with two-month loans where the company would pay interest per month. Short-term cash flow loans, with terms that normally last less than two years. Merchant cash advances: similar to invoice finance, but taken from future card terminal sales rather than money already owed to your business.
Understanding secured business loans
Features
The collateral significantly reduces the risk posed to the lender, as such, lower interest rates and better repayment terms can be achieved. Business owners who decide to go for a secured loan will usually not need to provide a personal guarantee.
Benefits
Less stringent credit ratings required. Ideal for short-term financing. Fixed interest rates. Early repayment is possible. Often cheaper than unsecured loans.
Examples
This type of lending includes asset finance where loans are secured against property, plant and machinery, and other assets.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
