The business loans market is full to the brim with hundreds of lenders claiming to offer thousands of products. For those seeking an SME business loan, these waters can be difficult to navigate. One wrong move to the wrong loan type or facility can cost a business thousands of pounds and can ultimately make their overall financial situation much worse. For this reason, avoiding the trap of reaching for the first cheap lender you can find is vital. We can help guide you through all of the options you have and can even match you to the right lenders according to your business and specific requirements, allowing you to gain a much clearer picture of just what you have on offer to you from our lenders.
Peer-to-Peer Loans (P2P)
For those seeking better rates on a business loan, a peer-to-peer SME business loan could be the ideal solution. With terms ranging from 6 months all the way up to 5 years, and with interest rates from 4.9 to 21.7%, these private investor-funded loans can be an ideal solution for businesses seeking financial aid. Most P2P loans tend to be unsecured, which is ideal for those who are unwilling to risk business assets, but you will have to handle and meet strict underwriting and acceptance criteria, both put in place in order to protect investors. P2P loans can be reliant upon credit status, but at Think, we can match you with a lender regardless of your existing financial situation.
Merchant Cash Advance
A merchant cash advance is essentially a form of loaning from yourself by borrowing against future card transactions within your business. The attraction of this SME business loan is that there are no fixed monthly payments, no APR and no hidden fees, meaning you’ll only need to pay back a pre-agreed percentage of any future sales. This typically ranges between 9 – 16% of any monthly card turnover, but with no credit score required, this could be ideal for business in need of a short-term cash injection. With a merchant cash advance, you can borrow up to 120% of monthly card turnover.
Working Capital Facilities
This is essentially an overdraft for businesses in that you’ll only pay interest on what you borrow, and will only see rates of about 1.1 – 6% per month. Most lenders will give you the chance to choose between payment periods of one month up to five years and offer daily, weekly or monthly repayments depending on your business’ financial situation.
Invoice finance is money given to fund any unpaid invoices, which is particularly useful for businesses with ongoing invoices that are stuck on a term basis. They will often fund up to 85% of any one invoice, and with over 100 lenders out there, you are certain to find a solution with Think. With new privacy rules having been implemented, your interests are always protected and rates usually sit around 1 – 5% of invoice value.
Asset Based Lending (ABL)
Asset Based Lending, or ABL, is an SME business loan option to gain funding for new machinery or company assets by using the asset itself as collateral. Dependant on your industry, you may find a lender that specialises more closely in your market, so make sure to enter any relevant details so we can match you with the right one!
Secured loans are similar to ABL but can be secured against any personal or business asset. While most lenders prefer buildings and bricks and mortar as security, they may accept other assets of a high enough cost. It is important to remember that with a secured loan, you may be at risk of having your property or other asset repossessed if you are unable to make payment.
Secured loans often take longer to arrange due to the ‘legalities’ which are required to take place in order to successfully authorise the loan. Terms will typically range from 6 months to 30 years, and rates will start from 2% over base rate.
These loans are typically used for housing and remodelling but can offer short-term relief for certain projects that need a quick cash injection to ‘bridge’ them over. Terms usually last between 1 – 18 months depending on your credit or the loan amount, with rates of just 0.75 – 2% per month. With bridging loans, LTV will typically sit at around 70% and exit funding will also need to be established prior to loan approval.
Interest on bridging loans is also charged monthly, but in order to provide additional help for businesses looking to start their project, this interest is ‘rolled up’ and the total amount is paid in full at the end of the term.
To find out more about business loans for your SME, get in touch with a member of our team. If you already know what you’re looking for, compare business loans with our expert tool, today.