Business Loan need-to-knows for SMEs

Whether you need a kick-start to your cash flow or a loan to get out of the trouble zone, there are many reasons why business owners need a helping hand with their finances. There are two key questions that business owners should ask themselves before they step into their lender’s office or put pen to paper on any application form:

1. What type of finance does my business need?

The answer to this will depend on how you intend to use the money. If you’re considering investing in property, you will need long-term finance like a mortgage. If you’re dealing with fluctuations in your working capital, then you’ll most likely need a responsive loan provider like a business credit card or an overdraft. The key to any loan is to determine your finance needs against an appropriate timeline so you don’t pay more than absolutely necessary.

2. Do I go for a big bank or a smaller lender?

The majority of business owners turn to the big banks. Why? Generally speaking, the big banks offer competitive interest rates and are governed by strict terms and conditions to protect the consumer from any unreasonable conduct.

On the other hand, some business owners, particularly start-ups find that the big banks aren’t willing to accommodate them because they don’t have an extensive trading history, which leaves smaller lenders as a more viable option. Big banks also tend to be risk-adverse and only lend to established businesses that have a long list of credentials and collateral. Smaller lenders are generally more flexible with their lending criteria however business owners should expect to pay more in rates and fees, especially for any unsecured finance plans.

Once you’ve determined a course of action, take the time to research relevant products on offer and compare terms, conditions and rates. There are a number of great financial comparison tools that anyone can use to understand more about a potential loan. When you’re ready to apply for a loan, you’ll need to compile all of your supporting documents – which can range from bank statements to full business financials, forecasts or detailed business plans. If you need a hand to prepare for a business loan application, get in touch with the SWAG team.