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Am I eligible for a business loan?
What is the criteria for a business loan?
Business loans offer flexible financing and can be carefully tailored towards your individual business circumstances, but it’s important to understand the eligibility criteria of lenders before applying.
If you’re rejected for a loan or apply for too many loans in a short period it can damage your business’s credit rating. A good credit score is one of the key criteria for financiers so it’s worthwhile considering this and other elements of your business when researching business loans.
What do commercial lenders consider before sanctioning a business loan?
Business age and trading history
The age of your business is important to lenders as the older it is, the more information they have available to determine their risk level. A relatively well-established business – around two years old or more – may offer the lender a trading history that fully supports a loan application whereas a younger business can only provide limited evidence of its viability.
Business credit score
Lenders also rely on a business’s credit score when considering an application for borrowing, so presenting a financially responsible company is key. They’ll look for missed repayments on existing or previous borrowing, over-reliance on credit, and arrears of utilities or other operational expenses. Having little or no credit history can also damage the chances of securing a business loan as financiers have nothing to help them determine their risk in lending.
Revenue
Your business income is a vital element in securing the level of financing you’re looking for as it underpins your ability to repay. Commercial lenders will use your annual revenue as a baseline but your net operating income - total income minus operating expenses – also shows how reliably the business will be able to manage the loan repayments.
Business sector
Some sectors experience specific financial challenges, such as late payments that are problematic for construction companies. This means that the sector your business operates in can influence a lender’s decision - in terms of whether to sanction a loan and the level of lending/beneficial terms they’re willing to offer.
Business assets
If your business owns an asset of value a lender may offer you a secured business loan using the asset as collateral. This lowers their risk, as they’re able to repossess the asset if you default in the future.
How to improve your eligibility for a business loan
- Put forward a strong business plan that clearly shows that cash flow can support the repayments
- Present a business that’s financially responsible and stable - one that can repay without issue, but also that has up-to-date filed accounts and tax payments
- Complete paperwork accurately and deliver it quickly when it’s requested by lenders
- Improve your business’s online profile if appropriate as financiers commonly review their risk by checking a business’s presence online, including customer reviews and feedback
UK Business Finance are commercial finance brokers with a wealth of knowledge on business funding. We know the eligibility criteria of all financiers in the UK and will ensure you stand the best chance of success with any application.
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Matt Cluer
Finance Expert
Matthew has over 15 years’ experience of working alongside businesses across the UK supporting directors, shareholders, and key stakeholders. At UKBF Matthew works tirelessly to secure the funding companies need when they need it. Adept at raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds as well as Government schemes, Matthew is perfectly placed to help your business access the funding required whether for general working capital, or to embark upon an ambitious growth and expansion project.
Top Finance Tips
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What are my options if I need business finance urgently?
Regardless of how closely you monitor your company’s cash flow, the nature of business means you may still need finance urgently at some point.
What is equity finance?
Equity finance is a business funding option that involves selling shares in return for investment. It’s commonly used by start-ups or early-stage company directors wishing to get their businesses off the ground and propelled towards rapid growth.
Hard asset finance v Soft asset finance
Hard asset finance and soft asset finance both offer flexible ways to purchase business assets. Whether you need a new piece of machinery to increase output or state of the art IT equipment, these types of asset finance options are invaluable in buying them affordably.
Regulated v Unregulated bridging loans – what’s the difference?
Bridging loans are finance facilities that help consumers and businesses to complete property transactions when a financial ‘gap’ needs to be bridged. Examples include a consumer purchasing a new home to live in and a business investing in commercial property.