Obtaining A Business Loan – Commercial Finance

Introduction to Business Loans And Commercial Finance

One of the traditional and arguably easiest ways to finance a business, either at start-up or during expansion, is to opt for a traditional business loan. Most high street banks now offer a business arm that can advance a reasonable amount of capital for new ventures. As well as high street banks, there are also merchant and commercial banks that specialise in offering business loans to both start-up and expanding companies.

Typical Business Loans and Accounts

Deciding on where to place your business account is actually quite a big commitment. Once you have set up an account, it is unlikely that you will want to go through the hassle of having to move your account details. Therefore, it is important that you make the correct decision, at the start. Unlike standard current accounts, most banks actually charge a fee to business customers, either on a monthly basis or on the basis of a per transaction cost.

Some banks charge commission on foreign cheques, others charge for facilities such as an occasional overdraft. Make sure that you know exactly what charges and facilities each bank you approach offers as, depending on your business needs, some bank accounts may prove much more expensive than others.

In many cases, business loans will only be available to those who have business accounts with the lender. This should also be borne in mind when selecting the best current account. Cost the loan AND the bank account over a year, three years and five years, to see which will offer you the best deal. 

Obtaining a Business Loan

In order to obtain a business loan, it will be necessary to prove to the lender that you are a viable candidate with a real prospect of making a success of your company. This is particularly true if your business is a limited company and you are not prepared to offer a personal guarantee for the loan amount. 

Ideally, you will have a track record of at least two or three years that proves that your company is making a healthy profit and is capable of financing the loan. Even if you do not have the track record, it will be necessary to have a sound business plan and projected budget that show exactly what you intend to do and how the company is set to progress. Not only should this include figures for sales and profit, but also the market research that you have undertaken in order to ensure that your projections are realistic.

In effect, going to a bank in order to request a business loan is similar to pitching to an investor and this should be treated just as seriously. Remember, business advisors often have the discretion to offer a more favourable interest rate to those businesses that they feel offer the best opportunities.

Summary

• A business loan is often seen as the quick and cheapest way to obtain business financing
• Most banks offer the full range of business services such as current accounts and loans
• In many cases, it will be necessary to take into consideration the current account if you are to be considered for the loan; you should, therefore, cost both together to get a real feel for your best option
• In order to obtain the loan, you will have to gather as much evidence as possible that you offer a viable business opportunity, as this is a good way of obtaining the best possible rates

Access Commercial Ltd can help with all business finance needs.