The Top 5 Benefits of a Business Loan

5 Ways a Business Loan Can Fuel Business Growth

If you’re looking to lend funds as a small business owner, knowing where to start and what eligibility criteria is needed can be difficult. For many borrowers, traditional bank loans just aren’t quite cutting it, with poor accessibility, limited funding options and very little flexibility. A working capital loan, or more simply known as a business loan, is a great financing option to secure funds for business expansion.

Secured and unsecured business loans can provide your business with funding to meet a variety of business needs. From purchasing new equipment and assets to covering those unexpected expenses and even funding large-scale expansion projects. There are several small business loan options available, but ultimately, they all serve the same purpose, supporting your financial goals.

There are a number of benefits to taking out a business loan:

1. Boost working capital

Borrowing for additional working capital remains a popular choice for many small businesses. Some seek it to fuel expansion, whilst others aim to implement a safety net to navigate economic uncertainty. Business owners seem to desire greater flexibility in managing their business operations, so having surplus cash flow in the bank allows them to dedicate more time to developing other areas of the business rather than solely focussing on the accounts. If the debtor has good credit and a solid business plan, a bank loan can offer short-term money for a business to get off the ground and grow.

Note – Small business loans sometimes have higher interest rates as this type of borrowing can be seen as riskier. Ensure you’re choosing the right facility for your business needs by speaking to one of our experts.

2. Buy intangible assets, stock and equipment

Business loans provide the means to borrow the capital needed to help you make much needed business purchases. Whether you’re seeking inventory investment, funding for intangible assets or expanding product lines, a business loan can help.

When it comes to acquiring equipment, as a business owner you typically face three choices: hire purchase, buying outright or leasing. Leasing and hire purchase can be preferable in some cases, owning equipment outright could be more advantageous in others. Asset finance facilities are commonly used to fund tangible asset equipment purchases, whilst business loans are better suited to intangible assets. This usually covers things such as mezzanine flooring, panelling, cladding and even tools. In short, most assets that don’t qualify for asset finance may be purchasable through a business loan.

Stock and inventory are necessary expenses if you operate a product-based business. There may be occasions where you come across discounted inventory, or you may need to buy in bulk ahead of a busy season. In either case, a short-term business loan can facilitate quick and straightforward cash flow. Investing in stock and inventory ensures that you can continue to fulfil orders whilst remaining financially stable.

3. Relocate, acquire or merge with another business

If your business operates from a traditional bricks-and-mortar site, expanding into a new location could be the catalyst you need to upscale and generate more annual revenue. The upfront costs tied to a new premises can be high, so an additional line-of-credit could be extremely advantageous. In the long term, relocating your operations can significantly outweigh future borrowing costs as you can operate at an increased capacity, especially if your new location has higher footfall with your target market.

For both large and small businesses, mergers and acquisitions have historically served as a route to growth. In the current economic landscape marked by challenges such as inflation, workforce issues and supply chain disruptions, a business loan could present an opportunity to combine with a complementary business or acquire those who are open to selling.

 

4. Invest in marketing or upgrade your website

In today’s digital age, having a strong online presence and enlisting the expertise of a digital marketer can have a significant impact on customer attraction. A professionally designed and optimised website serves as a crucial factor for many potential customers. Business financing options such as a business loan can help you make this investment, providing you with the funds to make upfront improvements and then repay over a period of time that suits you.

Having the capital readily available to implement important updates that will ultimately enhance the customer journey and user experience will often lead to an increase in new customers, retaining existing ones and generating more revenue.

 

5. Hire and train new staff

Your workforce is often your competitive edge, so it’s crucial to make sure you have the right people in the right roles, but this can usually come at a price. Term loans (business loans) can provide you with the funding required to cover business expenses such as training programmes, payroll and recruitment agencies.

The right staffing can also be critical to ensuring your business runs smoothly through those periods where high traffic is expected. In these situations, a shorter-term loan might be more appropriate, as months with a more profitable turnover will allow the borrower to pay off their business loan within a shorter time frame.

 

When it comes to business loans, what are the FAQs?

How does a business loan work?

A business loan involves a business owner borrowing money from a lender, which they will receive through a lump sum payment. This is then paid back with interest, either at a variable rate or a fixed rate. The repayments made each month will depend on a variety of factors including interest rates, the loan amount and over what term you choose to repay the loan.

How do you get a business loan?

To apply for a business loan, you’ll firstly need to provide some business information and prove your eligibility before a lender will approve your application. This often requires documentation such as bank statements, business accounts and usually a credit search. A soft search is usually carried out first, meaning your credit score will be unaffected unless you decide to proceed with the agreement.

Can you get a business loan with bad credit?

Contrary to popular belief, it’s possible to get a business loan with bad credit. There are several lenders who specialise in working with business owners with a less than perfect credit history. However, it’s important to note that you may be required to sign a personal guarantee or offer collateral to secure a business loan. In addition to this, whilst still possible, business owners with poor credit may find that the interest rate and fees may be higher when compared with a borrower who has good credit.

 

Get a small business loan

Unlike a traditional bank, PMD Business Finance have access to a panel of over 150 reputable lenders with an appetite for supporting small businesses. Our team of experts will scour the market to secure the most competitive rates and tailor a bespoke funding package with repayments that align to your financial needs, enabling you to continue to grow your business without limitations.

Applying for a business loan is simple. Our secured and unsecured loans range from £10,000 to £5,000,000, with monthly payments spanning from 1 to 5 years. We’ve developed a streamlined, hassle-free application process, so small business owners like yourself can focus on running your business. No more mountains of paperwork; we’ll take care of that. To start your loan application, simply complete our online form or call us directly on 0161 633 2548.

 

How can PMD support you with your commercial financing requirements?

Obtaining financing has become increasingly more accessible through the rising popularity of alternative lending facilities such as those provided by PMD. Whether it’s asset based lending, a commercial loan, equipment financing, refinancing or invoice factoring, we have an in-house team of financial specialists who are experts in commercial lending and will support you in uncovering the right financial package to suit the exact needs of your business.

If you’d like to find out about our full range of services, you can check out our business funding page or speak to a member of our team today.

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