What is a small business loan?

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What is a small business loan?

A small business loan is a form of business financing that enables small businesses to fund their daily operations costs. The loan is often provided by a lender or a high street bank and is usually secured against an asset, or unsecured.

Small business loans provide startups and small businesses the financial boost they may need to succeed. They can be used for various purposes, from managing cash flow to business expansion, and enabling businesses to grow whilst keeping costs at a low.

When business owners borrow money from a lender, a repayment plan is agreed as part of the lender’s terms of agreement. The money then gets paid back, with interest, in scheduled monthly payments over a pre-agreed repayment period. There are two main types:

• Unsecured business loans

• Secured business loans

small bussiness loan

What is an unsecured business loan?

Unsecured business loans allow business owners to borrow money without using valuable business assets as security for the lender. This is a popular funding option for small businesses that may not have assets they can provide as collateral for unpaid loan repayments.

Small unsecured business loans tend to have higher interest rates and often require a director’s personal guarantee. This guarantee is a legally binding document that makes the business owner personally liable to pay the loan repayments if the business defaults on a payment.

At SME Loans, we offer unsecured funding products. Please be advised that when you apply for a loan, the lender you get matched with may require you to sign a personal guarantee.

small bussiness loan

What is a secured business loan?

Secured business loans allow small businesses to borrow money on the condition that the business offers ‘security’ if the company defaults on the repayment of the loan. This security includes business assets such as property and equipment. The lender will take these assets if the repayment fails.

These loans work best for small businesses with access to valuable assets that they can use as collateral. When applying for a secured loan, the lender will consider the proposed asset and may ask for a valuation to be carried out.

Once the asset, loan amount and repayment structure have been agreed on, you will then give the lender ‘charge’ over the item. This ultimately means that the lender will hold legal authority of the selected item if your business defaults and doesn’t manage to pay back the loan.

Please be advised that the amount of money you want to borrow will need to be equal to the value of the item you’re offering as security.

How to get a small business loan?

You can get a small business loan by filling out an online application. You will likely have to provide relevant documents in order to be accepted by a lender, such as personal details and business information. If your application is accepted, one of our broker's will be in touch to discuss the next stages of the application with you.nnOur online application supports iOS, Android and Google devices.

What is a small business loan?

A small business loan is a form of business financing which is designed to help startups and small businesses. Small business loans come in a variety of forms, the main two types are secured business loans and unsecured business loans.