Loan Alternatives for Businesses in the UK

Loans are always an essential component for investing in any business, especially when it is a start-up trying to get off the ground.

While most entrepreneurs take out traditional bank loans, there are many alternatives that can help you if you don’t qualify for a traditional loan from a bank or want to explore a different alternative.

When you need funds it is best to weigh all of your available options. Below are some alternatives to bank loans you can get in the United Kingdom that will help you get started.

Loans for Start-Ups

One popular option for new companies is to take out a start-up loan from the government. These subsidized loans offer anywhere from £500 to £25,000 to begin doing business or make it grow.

This is an unsecured personal loan, unlike traditional business loans, but you can get free guidance writing your business loan and 12 months of free support mentoring.

To apply for this government-backed loan you have to live in the UK and be 18 or older. You’ll also have to start a UK-based business that has only been fully trading for less than 24 months.

These fixed-interest loans have a rate of 6 percent a year and are repayable over a period of five years. Furthermore, you don’t even have to pay an application fee and can repay the loan whenever you want.

Standard Personal Loans

Your second option is to take out a personal loan from any credit union or business that offers them. The experts at the site MoneyPug, which is used to find cheap personal loans, there are advantages and disadvantages of this depending on how much you want to take out and what the interest rate is.

Still, for a lot of people, you can get a reasonable interest rate and use the money to invest in a business instead of using it to pay personal bills.

While it really depends on each specific loan, you should show caution on the various risks involved, including investment income, interest rate, income, and capital risks. If you know what you are getting yourself into, you can use a personal loan to your advantage.

Business Cash Advances

Another government-subsidized loan is a business cash advance, which is mainly used by small business owners. When you take out one of these loans, you can get anywhere from £2,500 to £300,000. It is designed for businesses that need the minimum amount offered to pay for credit or debit expenses.

You have to be trading for over four months, but all repayments are adapted to your cash flow. Small percentages come from the business taking instead of a fixed amount, so you don’t have to worry as much about the ups and downs of getting started.

Business Enterprise Fund

Providing from £500 to £150,000, a business enterprise fund will lend you 100 percent of a proposition across any business sector. Assisting more than 2,000 business since 2004, the fund is designed for businesses that are unable to raise the money they need from traditional lenders.

It can also be used for any company needs, including expansion, assets, and cash flow. Applicants with bad credit are also considered, which is helpful for people who need to make money to heal their credit score. All profits from these funds are reinvested in the company, making it a socially sound cash option.

Consider All your Options

While a mainstream lender may be your preferred option, it is always best to consider all of your options before deciding on a specific lender. Businesses that are looking for a loan should look at banks that are familiar and that are known as a possible route to finance a company.

But still, you should also have an open mind about who you are lending from and what is available to you. Small and medium businesses are shying away from bank loans because they are lending less to companies in general.

That’s why many entrepreneurs are searching for alternative means. But whatever works for you should be utilized. When you take advantage of all your options, you can maximize your funds and work towards having a profitable and success.