image of people in unsecured business loan meeting

How Business Loans Work

Are you considering a business loan but not sure of the process or how they differ from the average loan? There are many different types of business finance, and it’s important to understand how each works before choosing the right option for you and your company. Many businesses rely on loans or alternative finance options to grow and flourish, and most companies wouldn’t even get off the ground without a bit of financial help.

So how do you apply for a business loan? We’ve put together this informative and concise guide to tell business owners and entrepreneurs everything they need to know about loans. From covering a short term cost to investing in your next location, business loans can be a great tool for growth if used in the right way.

What can I use a business loan for?

You may have to disclose what you’re using the cash for, and the reason for the business loan could actually change the type of finance you’re applying for. For example, if you need some funding for a refurbishment or to buy a second commercial property, then it could be more beneficial to take out a commercial mortgage than a regular business loan.

Business loans can typically be used to fund:

Business expansion

Business acquisition

Property renovation

Tax liability

Consolidation

Wages, stock or other cash flow issues

Unsecured and secured business loans

Business loans have many different names, depending on how much you wish to borrow and what you’ll be using the loan for. From invoice finance to commercial mortgages, it can get pretty confusing deciding on the best loan for you and your business. It’s always best to speak to a financial advisor and a range of brokers and different lenders before making your final choice.

The main difference between the different types of business loans is if they are secured or unsecured. The majority of all loans are a secured loan, which means that the money is secured against a personal asset – usually a residential property. If you fail to make repayments, the lender could take away your home.

However there are now many other options, including unsecured business loans. These involve more risk for the lender, and therefore this is usually a short term option for commercial borrowers who can repay faster than most.

The application process

Applying for business finance will be completely different depending on your lender. Go to a high street bank and you’ll have a long, arduous process and you’ll also have to meet very strict criteria. With alternative finance providers such as Genie Lending, the application process is quicker and you could arrange a loan in as little as four hours.

Always ensure you receive fair information and consider all options before committing to a specific loan. Remember that if you’ve been refused a business loan from a bank, there are still plenty of other options for commercial finance.