How to Apply for a Small Business Loan

If you are looking to open, or expand, an existing business, you will need to apply for a small business loan. When applying, you will need to have documentation to accompany your loan application. Some of the documentation you will need to present to the bank is a business proposal, potential financial growth, and a repayment plan as well as any required documents requested from the bank.

Business Proposal

Prior to submitting your application for a small unsecured business loan, you will need to develop a plan. The plan should address the project you are trying to fund. It should demonstrate to the lender that you understand the market and products that you are offer. Give the lender some insight as to what you are trying to do. A basic business proposal will include a summary (which provides a high-level view of what is contained in the proposal, financial analysis, competition analysis, forecast of potential growth and a contingency plan.

These items provide the lender with a sense of how well you know your business. It is important that all these areas be outlined in detail in the business proposal. Be sure to provide enough information. When a lender reads your proposal, you want them to have a clear picture of how you will use this loan, not only to raise capital to pay them back, but to be a profitable venture.

Financial Documentation

To accompany your business proposal, you will want to develop a financial analysis. The financial analysis should detail the budget on the project, financial projections, market trends and equity. These items demonstrate to the lender the viability of your business. Lenders want to invest their money into a business that will be profitable. The more research you present to them about your business and its potential profitability, the better your chances are at being approved. If you are stepping into a market that has not been tested or is very new, use comparable industries to demonstrate the potential growth.

In addition to your financial analysis, be prepared to provide copies of your personal credit record and tax returns. Lenders like to understand your credit history and how you have handled the credit extended to you.

Repayment Plan

Last, identify your repayment plan. You should factor in interest rate and repayment time. Your forecast will give the lender an idea of the time frame in which to be repaid. Include any collateral that you plan to use as a way to guarantee repayment. Using collateral will help to secure the loan and demonstrate to the lender that there is a way for them to recoup their funding should you default.

Finally, discuss your exit strategy. An exit strategy is important to address. It shows future thinking. While the exit strategy may be based only on future predictions, it still demonstrates that you understand that change is a part of business and that you are prepared to handle situations that may arise.

What are business loans?

A business loan is similar to a personal loan, but is specifically designed for business use.

With a business loan, you are lent a certain sum of money over a period of years, and the interest rate and monthly payments are fixed over the term. 

Some business loan providers offer access to short-term finance and may, for example, offer sums of up to £30,000 for up to a year. Others will allow you to borrow larger sums over a longer period.

In addition, some providers specialise in small business loans, while others focus on start-up business loans for new businesses.

What are the benefits of having a business loan?

Business loans can help with cashflow, and help to tide you over when times are tough by offering access to short-term finance. 

Other loans can help you borrow over a longer period – if, for example, you need to pay for one-off business expenses, or to fund expansion plans.

Easy Loans Hub can offer a big loan when you first set out running your own business, while small business loans can prove vital when managing the demands of employees, clients and cashflow for a smaller business.

With some lenders – known as “peer-to-peer” lenders, you can borrow from people, rather than from a bank. With this type of loan, you may be able to choose from a secured loan, an unsecured loan, or an asset finance loan. 

With some types of business loans, you can set out how much you want to borrow and for how long. Some offer flexible repayment options, while others come with no early repayment fees. 

Who can apply for a business loan?

Any firm can apply for a business loan, no matter how big or how small, although some providers will only lend to limited companies, so you need to check this.

Business loans can help with cashflow, and help to tide you over when times are tough

Crucially, what you need to realise is that in the uncertain economic climate, it has grown a lot harder for almost any business to get accepted for credit. To apply for a business loan, your business will usually need to be VAT registered; there may also be a minimum monthly turnover.

Some providers may also stipulate that you have at least two years of filed accounts, although certain lenders are happy to lend to businesses with less than two years’ trading history. 

Why apply through Easy Loan Hub?

If you are looking for a business loan, you need to spend time carrying out a little research, as there are different types of loan on offer from a host of providers. 

The easiest way to compare all the loans available in once place is by using a price comparison tool such as Easyloanshub.co.uk

With just a few clicks on the free and independent tool, you can see details of the rates and features of the business loans on offer to help you find the best business loan for your needs.