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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.
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.
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.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
How to financially prepare for investor exits
Whether your business is at an early stage or it’s more established, the financial boost provided by external investment, such as from private equity firms, angel investors, and venture capitalists, is invaluable.
How to finance a MBO
If you’re considering conducting a management buyout (MBO), there are various means by which you can fund it. Financing commonly involves a level of personal funding by individual members of the management team combined with additional external borrowing, such as bank loans and asset financing.
What lenders look for in a business loan application
Knowing what lenders look for in a business loan application helps you present your business in the best light – an important consideration, as being rejected for a loan damages your company’s credit rating and makes it difficult to borrow in the future.
What is a commercial finance broker?
A commercial finance broker is a professional intermediary who helps business owners to source the best lenders and deals. They provide a vital service that eases access to funding and ensures businesses obtain the most appropriate finance for their needs.