Maintaining a healthy cash flow is crucial for the growth and stability for many UK SMEs; from startups to long-standing businesses. Having access to cash flow, on the other hand, isn’t always straight forward. In fact, cash flow is one of the biggest financial challenges that any small business faces. But it doesn’t need to be. Financing options like business loans can provide business owners with the lifeline they require.
What are business loans?
Business loans are a type of funding that business owners can utilise to inject a lump sum of capital into their business. They are only for business purposes, not for personal requirements. Business loans help SMEs to expand, grow and stay agile without needing to dip into cash reserves.
How business loans work?
The most common types of small business loans are secured and unsecured.
Unsecured business loans don’t require any type of collateral as security. Instead, lenders will take a closer look at financials, credit history and any payments the business already makes. This type of finance tends to be riskier for both the borrower and the lender, so interest rates are often slightly higher.
Secured business loans, on the other hand, requires business owners to provide an asset as collateral. An example could be a property the business owns. With this type of agreement, there’s usually less risk to the lender, therefore interest rates also tend to be lower. It’s important to know that if the borrower does not repay the funds, the lender can sell the asset.
A small business loan is usually paid back over time, often in regular monthly instalments, with interest.
What can you use a business loan for?
From business expansion and investing in stock and inventory, to managing cashflow and hiring staff during peak trading periods, business loans have an array of uses. You can even use a loan to cover business overheads.
Some other uses include:
- Debt consolidation – Business loans can be used to consolidate existing debts into a single payment, potentially reducing interest rates whilst improving cashflow.
- Renovations and improvements – Funds can cover the costs of renovating physical sites or even to improve facilities that enhance the customer experience.
- Marketing and advertising – Allocate funding to promotional campaigns and increase brand awareness/attract new customers.
- Emergency funds – It can’t hurt to have a safety net! You can use a business loan to act as a cash buffer for unforeseen circumstances.
- Research and development – Business owners can use a business loan to support new product development and/or improvements to existing products.
Are there government-backed business loans?
The government offered a number of loan schemes during the pandemic, including Coronavirus Business Interruption Loan Scheme (CBILS). There was also the Bounce Back Loan Scheme (BBLS) and Recovery Loan Scheme (RLS).
The Growth Guarantee Scheme (GGS) was introduced on 1st July 2024 and is in effect until March 2026. This scheme provides business owners with access to 70% government-backed finance for loan amounts of up to £2m.
What are the requirements for a business loan?
Whilst requirements to secure a business loan will vary depending on the funder criteria and the type of loan, there will be several factors that are typical requirements for most business loans:
- A UK incorporated business
- Documentation including financial statements and business bank statements
- Sometimes collateral to secure the loan
- A good business credit score
Why choose a business loan?
Choosing a business loan can be a wise move for business owners who are looking to expand or stabilise their operations. By securing a business loan, you can focus on what truly matters. Driving your business forward. Unsecured and secured business loans enable UK SMEs to access the capital they require to overcome financial restraints and better manage cashflow.
One of the main benefits of utilising a business loan is taking advantage of competitive interest rates and bespoke monthly repayments. Business owners can pay loans back in a more cost-effective way that suits their business needs without straining the company’s cashflow.
How can PMD support you?
As of 2024, there are over 5.5 million small businesses in the UK. It goes without saying that not all business needs are the same. That’s why our in-house team of expert finance specialists have a wealth of knowledge that enables us to facilitate a full-service offering. Our facilities include
- Asset finance
- Invoice finance
- Asset refinance
- Merchant cash advance
- Commercial mortgages and bridging loans
- Acquisition finance
Our team are focused on helping your business to reach its goal and true potential. We’ll lean on our strong relationships with our lending panel of 150 funders to make sure we meet your business requirements, as well as exceeding your expectations.
Apply for a business loan
There are several ways you can complete a business loan application with PMD. If you’d like to speak with one of our team about your requirements, you can contact us on 0161 633 2548 or email: info@pmdbusinessfinance.co.uk. Alternatively, you can complete our online application form at a time that suits you and someone will be in touch with you as soon as possible.