What is a Business Loan Broker?
A business loan broker acts as an intermediary between businesses seeking financing and potential lenders. They help businesses find suitable loan options by leveraging their extensive network of lenders, including banks, credit unions, and alternative financing sources.
Brokers assess the specific needs of a business, guide them through the loan application process, and negotiate terms on their behalf. By doing so, they save businesses time and effort, often securing better rates and terms than the businesses might obtain on their own.
Borrowing a loan without using a broker is possible, but you risk making mistakes and either not getting the best loan deal for you or your application being rejected if you do not know what type of loan you can apply for.
A business loan broker can give you all the help you need in finding a cost-effective financing option for your business that provides you with what you need. The knowledge you gain from working with a good broker guarantees you will find a better deal.
Our brokers at Clifton Private Finance have up-to-date expert knowledge on all the business loans available, so if you wish to work with a good business loan broker, feel free to get in touch with us to discuss your next steps.
Our video below on business loans for limited companies summarises how they work and the eligibility criteria.
Types of Business Loan
Business loans come in a variety of forms, tailored to suit a multitude of industries. Some are provided by high street banks, whereas other can only be accessed through specialist and challenger lenders.
How much you can borrow, and the specific eligibility criteria can vary depending on the type of loan and your business’s size, turnover and industry.
Some of the key types of business loans are:
- Secured business loans
- Unsecured business loans
- Working Capital Loans
- Asset Finance
- Invoice Finance
- Revolving Credit Facilities
- Bridging Finance
- Commercial Mortgages
How Much Could I Borrow?
Use our business loan calculator to get a quick quote. Or get a bespoke business loan quotation.
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What Are the Advantages of Taking Out a Business Loan?
Taking out a business loan offers several advantages:
Capital for Growth
Business loans provide the necessary funds to expand operations, invest in new projects, purchase equipment, or open new locations, enabling business growth and development.
Improved Cash Flow
Loans can help manage cash flow by covering operational expenses during slow periods or bridging gaps between receivables and payables.
Ownership Retention
Unlike equity financing, business loans do not require giving up ownership or control of the company, allowing owners to retain full control over their business decisions.
Build Credit History
Successfully repaying a business loan can help build a strong credit history, making it easier to secure future financing on favourable terms.
Flexible Options
A wide range of loan products are available, from short-term loans to long-term financing, allowing businesses to choose the type that best fits their needs and financial situation.
Recent deals we've secured for our clients:
What Should You Consider Before Taking Out a Business Loan?
Here’s what to consider before taking out a business loan:
Increased Financial Burden
Loans require regular repayments, which can strain cash flow, especially if the business experiences unexpected financial difficulties.
Interest Costs
The interest on business loans can be significant, increasing the overall cost of borrowing and affecting profitability.
Assets Required
Many business loans require collateral, putting business assets at risk if the loan cannot be repaid.
Credit
Failing to meet loan repayment obligations can negatively impact the business's credit score, making it harder to obtain future financing.
Eligibility
Securing a business loan can be difficult for new or small businesses with limited credit history or insufficient revenue, leading to possible rejections or less reasonable terms.
Restrictions and Covenants
Some loans come with restrictive covenants or conditions that can limit business activities and flexibility, such as restrictions on additional borrowing or requirements to maintain certain financial ratios.
How Hard is it to Get a Business Loan in the UK?
The process of securing a business loan can be quick and easy, but in some cases finding a suitable financial solution and lender can be tricky.
Funds for a traditional secured business loan can be released in approximately 2-3 weeks but there are usually a few more hoops to jump through regarding eligibility criteria. You’ll primarily need an asset to secure the loan against, and lenders will typically want to see a good trading history (of about 1-2 years), turnover, and a clean credit profile.
Other types of business loan have less stringent criteria, such as merchant cash advances or a revolving credit facility. Products like these can be accessed in as little as 24 hours, but they come with higher interest rates.
While business funding can be easy to access, getting the best deal and finding a lender that can accommodate your business’s needs can present its challenges. It can be difficult to get an accurate overview of the market without the help of an expert.
In some cases, specialist lenders that offer bespoke finance deals and cater to more complex structures than a high street lender only work through brokers or are simply harder to find than larger lenders.
If your business has a good credit history, healthy profit margins, and has been trading for two years or more, it’s likely you won’t have too much trouble finding a business loan. But it’s always recommended to work with a business loan broker to make sure that you’re getting the best deal.
Which Business Loans Have the Lowest Interest Rate?
It depends on your business and why you’re looking for finance, but the cheapest type of business loan will typically be a secured business loan. These loans can often have stricter eligibility criteria because secured loans are regulated by the Financial Conduct Authority.
Commercial mortgages are used to purchase property for business use, and these loans will commonly have the lowest interest rates.
Myth-busting: Business Loans
Freelancers and self-employed individuals can’t get a business loan
Freelancers and sole traders are a primary example of business structures that may find it challenging to obtain a business loan with traditional lenders. Freelancers do in fact count as businesses, and there are many cases where it can be beneficial to use business finance.
It’s common for freelancers to go through periods of limited income between clients, and when used in the right circumstances, financial solutions such as invoice financing can help boost cash flow.
There are plenty of challenger banks and even high street lenders that are willing to provide loans for this type of business, and working with a broker can get you access to the best deal quickly and efficiently.
Businesses with Minimal Assets Can’t Get Loans
A business with little to no assets can still be eligible for business finance, though it may face more challenges compared to asset-rich businesses. Lenders typically look at several factors beyond just assets when evaluating loan applications.
These include the business's cash flow, credit history, revenue projections, and the owner's personal credit score. Businesses can explore unsecured loans, which do not require collateral but may come with higher interest rates and stricter qualification criteria.
Additionally, other financing options like lines of credit, merchant cash advances, invoice financing, and peer-to-peer lending may be available. These alternatives often focus on the business's revenue and transaction history rather than tangible assets. It's also beneficial for such businesses to have a strong business plan and demonstrate consistent income to improve their chances of obtaining financing.
You Can’t Use a Loan To Buy a Business
This type of financing is commonly referred to as an acquisition loan. Lenders provide these loans based on the potential profitability of the business being purchased, as well as the buyer's creditworthiness and experience in the industry.
The loan can cover various aspects of the acquisition, including the purchase price, working capital, and any associated costs. To secure an acquisition loan, buyers typically need to present a detailed business plan, financial projections, and sometimes collateral. Using a loan to buy a business allows individuals or companies to expand their operations without depleting their existing capital.
Businesses With Limited Cash Flow Can’t Get Finance
Working capital loans comprise a portion of the business loan market and cater specifically to companies with fluctuating income structures. Merchant cash advantages, for example, are designed for in-person, service-based businesses such as cafes and restaurants.
It’s common for businesses in the hospitality industry to experience seasonal slow periods, so an injection of capital with a flexible payment plan can be useful here.
Why Work with a Business Loan Broker?
You can save a lot of time with a business loan broker, as once you begin the initial process of speaking to your broker, they will already have an idea of what type of loan you need and what deals they can find for you as this is their area of expertise. Where you might have to do a lot of research when finding a loan for yourself, a business loan broker already has all this information.
Business loan brokers also know where all of the highest competition is, so if there are a few different options available, they may get you a great deal through this competition between lenders.
No matter your reason for wanting a business loan, a business loan broker has likely dealt with a similar situation before. Whether to get your business out of a financial crisis or to expand and grow your company, an experienced business loan broker will have already worked with many businesses in similar circumstances to yours, so they will know exactly what kind of advice you need.
They simplify the loan search process, saving businesses time and effort by handling the legwork of finding and negotiating with potential lenders. Brokers also provide expert advice, helping businesses navigate complex financial products and improve their chances of securing favourable terms.
By leveraging their industry knowledge and relationships, brokers can often secure better interest rates and terms than businesses might achieve on their own. Additionally, brokers can assist with the application process, ensuring all documentation is correctly prepared and submitted, increasing the likelihood that you'll be approved.
Get Access to Market-Leading Rates
Here at Clifton Private Finance, our business loan specialists offer a complimentary advice service and can help you choose the right finance solution for your business requirements.
Our broker team will help you source the most competitive business loans, commercial property finance, business acquisition finance and cash flow funding solutions.
As a specialist finance broker, Clifton Private Finance can provide a clear picture of your options. We will assess your circumstances and arrange a finance solution tailored to your needs.
If you need business funding, call us on 0203 880 8890 or check your eligibility below.
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