Small business loans.

Start with the job the money needs to do

A small business loan can help fund a defined expense, but it is only one possible route. The right starting point is the amount needed, when it is needed and how the business will repay it.

For equipment, consider asset finance. For unpaid business invoices, investigate invoice finance. For a short timing gap, an overdraft or other working capital facility may be worth comparing.

Understand the available structures

Term loans provide a lump sum repaid over a set period. Some are secured against assets and some are unsecured, although personal guarantees may still apply.

A revolving facility lets you draw and repay within an agreed limit, subject to terms. Charges can depend on usage, facility size and the provider. Flexibility is not the same as low cost.

What lenders may look for

Expect questions about trading history, turnover, profits, cash flow and current debts. Different lenders have different minimum criteria, so check before applying.

Accurate records and a clear repayment plan help you assess an offer, even where a lender advertises a quick process. Speed should not replace understanding.

Compare on a like-for-like basis

Write down the amount received, term, regular payment, fees and total repayment for each option. Check whether interest is quoted monthly or annually and whether the figure is flat or calculated on a reducing balance.

Stress-test repayments against a quieter period and consider whether waiting, saving or making the investment in stages would leave the business in a better position.

A few common questions