Business Loans

Keeping your business moving with a much-needed cash injection

A business loan is a loan for commercial purposes.  Whether you are looking to get your business off the ground, plug a cash flow gap or fund an expansion project, a business loan could provide the funding without you losing equity; it’s a debt-based finance solution.

Could my business be eligible?

Business loans are available to businesses of all sizes; from small start-ups to large established businesses. But actually securing the funding can be a difficult hurdle.  Most lenders will request evidence of the company’s financial stability, including consistent cash flow, to reassure them that the loan can be repaid.

Different lenders will have different criteria so finding the one most suited to your needs will give you the best chance of securing the funds.

Knowledge of the providers

Business loans are widely available, but the key sources are:

  • Government backed start-up loans –  great for small businesses looking for the benefit of unsecured finance with a low interest rate
  • Peer-to-peer platforms – a very viable option for smaller, low interest rate loans as long as you have an excellent credit rating
  • High street lenders – excellent for existing businesses with a strong track record, especially if there are assets available as security
Different loans meet different business needs

What are the options?

There are a number of business loan choices that you need to make to ensure the finance is structured to suit your business.

Fixed vs Variable

The repayments on a fixed rate loan will be consistent over the loan period to allow for accurate financial planning. A variable loan, however, will attract interest rate fluctuations meaning your repayments may change from one month to the next. Most small businesses opt for fixed.

Funds for growth and expansion
Terms range from 2-5 years

Secured vs Unsecured

A secured loan often involves larger amounts of lending, backed by a business asset to act as security to the lender should the loan default.  An unsecured loan doesn’t carry the same reassurances and so the increased risk to the lender is often offset with higher interest rates.  An unsecured loan will sometimes request a ‘director’s guarantee’ as alternative security.

Short-term vs Long-term

For cash quick fixes, which are likely to involve smaller amounts, a short-term loan will mean you repay the money quicker and free up the monthly outgoing. A long-term loan is better suited to large volume borrowing to facilitate a major project. The loan term will often be dictated by a combination of your circumstances and the lender’s criteria.

Personal guarantee may be required

The pros and cons of a business loan

Pros

  • Can be cost-effective borrowing with low interest rates
  • There are a lot of commercial loan sources willing to lend
  • Business loans can be used for almost any business-related purpose
  • Business loans are available at any stage of business growth

Cons

  • Your circumstances could classify you a risk and attract high interest rates
  • A competitive loan relies on a strong credit history
  • What you are using the loan for can dictate the terms of the loan
  • They can involve a lengthy application process so are not always a quick-win

“Our bank turned us down for a loan of £360,000, as had other sources of funding. We contacted Pegasus with an urgent requirement and they found a provider that was willing to liaise by phone and email. The loan was agreed in principle and we met the bank to sign the documents and to comply with money laundering requirements. Getting a loan so quickly and in this way proves the strength and professionalism of Pegasus’s network of contacts.”

Nick Clements, Director – Millstream Penthouse Systems Ltd.