Commercial loans: five common types

Anyone with a small business that needs to grow, buy equipment, or even just manage their cash flow, will have considered a commercial loan at some point.

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There is plenty of choice when it comes to banks and lenders online offering commercial loans for small businesses, but knowing which is the right one isn’t always easy.

You may feel more comfortable choosing a loan from a big-name lender or bank, or you might want to go with a local lender who has more knowledge of your area.

If you’re looking for commercial loans Northern Ireland has to offer, for example, lenders such as may fit the bill.

Whichever lender you choose, here are five broad commercial loan categories from which you can choose a deal to suit your business needs.

Government-backed loans

If you are trying to get your new business off the ground anywhere in the UK, government-backed startup loans are one good option to consider. You are offered assistance in writing your business plan, and you can receive 12 months of mentoring if successful.

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Unsecured Business Loan

Typically, this loan is ideal for startup businesses with no assets to offer as security. Loans range between £1,000 and £100,000 with flexible repayment options. Interest rates are likely to be higher, and because it is unsecured, you may require a personal guarantee.

Secured Business Loan

Like homeowner’s mortgages, the value of your business’s assets secures the credit agreement. Loan amounts can be higher, with a longer repayment period. Interest rates are lower, too, but are more likely to be variable.

Short-Term Loan

These six-month loans are ideal for funding a new project or covering anticipated cash flow problems. Quick and easy to apply for, the funds can be made available on the same day in some cases. Be aware that the interest rates are higher, and lenders may also want to see your turnover and the history of your trading before approving the loan.

Asset Finance

This is for financing assets such as machinery, vans or office equipment. Repayments for these lease or hire purchase agreements are fixed, and it is more expensive than buying the assets outright.

Be sure to talk to a financial professional before making a decision about the loan that best suits your business.

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