What type of business loan would suit my business? 

Most businesses can benefit from investment at some stage. If you’re looking to grow your current business, a business loan can be a good solution to explore.

When it comes to business loans there are various options to consider based on your business requirements and your individual circumstances. We’ve put together an overview of types of business loans to help you decide on the right type of finance for your company. If you’re still a little confused don’t worry- a finance facilitator such as PMD will be able to advise you and find the ideal funding solution for your needs.

What is a business loan? 

Firstly, let’s take a look at what exactly a business loan is. Put simply, a business loan is a sum of money issued to a business owner. This is exclusively for use in their business and is repayable—with interest—over a set period.

A business loan is often used to purchase necessary equipment, stock, ease cashflow, finance projects for your company. When it comes to the amount that you can borrow, a business loan can range from £5,000 up to several million pounds.

What type of business loan would suit my business?

It’s important to ensure that you apply for the correct type of loan for your business. Understanding the different types of loans available can help you to determine which is best for your business. The options that are available to you will depend on factors such as your trading history, balance sheet assets, and cash flow.  

Unsecured business loans

Unsecured business loans are the preferable option for asset-light businesses. This is because you won’t need to offer any security (an asset to secure your loan). They’re also a good option for companies experiencing a phase of fast growth who need access to growth capital.

Unsecured loans are more straightforward than secured loans, and can be a faster option when it comes to getting funding. However, it’s worth noting that lenders of unsecured loans will almost always ask for a personal guarantee.

Secured business loans

If your business is asset-heavy and has a demonstrable trading history, a secured business loan may be a preferable option. Secured business loans require a business owner to provide assets such as property or machinery as security. Because this type of loan is secured, it poses less risk to the lender. This means they are able to offer lower interest rates and better repayment terms.

Secured business loans are often cheaper than unsecured loans, and early repayment is possible. Furthermore, business owners who decide to go for a secured loan may not need to provide a personal guarantee. 

Working capital finance

Working capital finance best suits businesses with short-term expenses, such as paying wages or acquiring stock, as this source of funding is often for less than 12 months.

This type of business loan can be ideal for businesses needing flexibility for purchases, and better cash flow. 

Short term business loans

Short term business loans can be an ideal solution if your business experiences unexpected payment demands or growth opportunities. Sometimes you need cash quickly in order to meet payments or take advantage of opportunities. This is where a short term loan can help. Short term loans usually have a fast approval, with funds available without delays.

Other types of business loan

As well as the four loan types discussed above, there are also additional finance options available to businesses including merchant cash advances, asset finance and invoice finance. A professional business finance advisor will be able to advise you on the best options for your business depending on your individual circumstances.

How do I apply for a business loan?

When it comes to choosing the most suitable type of business loan for your business, it can seem as if there are countless options to choose from, all with their own pros and cons. To ensure that you take out the best type of finance solution for your individual business needs, it can help to speak to a business finance specialist.

PMD has an unrivalled range of solutions, specialists, and access to over 100 lenders, and can open up a number of flexible, independent and competitive funding lines to drive your business forward.

PMD will take the hard work out of securing your business finance. We’ll liaise with funders on your behalf to ensure the best possible terms are secured. Leaving you free to focus on running your business.

If you’re considering taking out a business loan to help grow your business without limits, get in touch today to see how PMD can help. We can provide all the advice and guidance you need, as well as ensuring a streamlined, stress-free process. 

You might like...

If in doubt…please don’t hesitate to ask!

July 10, 2018
Customers are often surprised by some of the types of equipment we are able to finance.

Great news! Beauty & Aesthetics are open for business

November 30, 2020
From lockdowns to re-openings, this year has been turbulent for the Beauty & Aesthetics industry