6 advantages of loans in business

If you run a business then it’s likely that you’ll need to borrow money from time to time. From keeping cash flow moving to investing in stock, machinery or new premises, a business loan can help steady your business through a difficult period or take it to the next level. Borrowing can take many forms, from credit cards and overdrafts to term loans. Here we take a look at the advantages of loans in business.    

What are business loans?

In simple terms, a business loan is an agreement to borrow money between your business and a chosen lender. The reasons for borrowing money range from the highly specific, such as purchasing a piece of specialist equipment, to merely accessing funds to use as working capital. Having borrowed the money, you’ll pay it back on an agreed schedule of regular repayments, with the full amount to pay totalling the money borrowed plus any interest or fees being charged. 

The 6 advantages of a business loan 

Fuel your growth

The money you have coming into your business from day to day activity may be sufficient to keep things running smoothly, but may not be enough to fund new ventures or your scale up plans. 

There is often a gap between paying for your growth activity and reaping the rewards, which is where a business loan can step in. For example, you could run a marketing campaign to attract more business, increase your stock for a bigger Christmas season, or add a new vehicle to increase your capacity.

They’ll all pay for themselves and more over time, but you need the cash up front to fuel that growth. So if your day to day revenue won’t be enough, a business loan can help you make that leap.  

Cash flow buffer

The old saying is that “Cash is King”, and  having a cash flow buffer means you can react at speed to take opportunities without impacting on the day to day operations of your business. A business loan can provide that extra capital for you, so if a new product suddenly becomes available, for example, you can react quickly and make it available to your customers. The same applies if an unexpected expense arises, such as higher bills or repairs to plant or machinery. 

Keep all your equity and stay in control

One alternative to taking out a business loan is seeking investment. The advantage of a business loan over an investment, however, is that you get to keep full ownership and a lender won’t seek to have any influence on how you run your business. Investors, on the other hand, often demand a stake in the business in return for the money they put into it, and will often expect to have some kind of say in business decisions.  .   

Improve your credit rating

Taking out and successfully repaying a business loan will boost the credit rating of your business, making it easier to borrow again and to borrow more should the need arise. The better your business credit rating is, the better the terms you are likely to receive, making it easier to access funds and invest in your business. 

Consolidate existing debt

If you’ve been running your business for any length of time there’s a chance that you might have had to take out a number of credit products for different purposes. A business loan can be used to consolidate these into one easily managed repayment schedule, making it easier to manage your cash flow. Depending on your offer, it could also help to reduce your costs or monthly repayments too.   

Attractive terms

Many lenders offer better interest rates on business loans than they do on other products, reflecting the competitive nature of the business loan marketplace. Business loans are also often offered on an unsecured basis, meaning that as long as your business meets the eligibility criteria of the lender you won’t be asked to put any collateral forward. This helps you keep control of all your assets, and helps to access finance if you don’t have assets to put down as collateral.   

Options at Funding Circle

At Funding Circle we offer a variety of products to suit different needs, from business loans to short term lending.

Funding Circle business loans

Borrow from £10,000 to £500,000 over up to 6 years. All loans are fixed rate and come with no early settlement fees. 

Asset finance

Borrow up to £5 million to fund new equipment, vehicles, machinery or other assets through our partners.

FlexiPay

Spread the cost of business bills, invoices and more over 3 months with an interest-free line of credit of up to £250,000.