Business loans are a type of loan that enables businesses to obtain funding for any business purpose. Business loans can refer to lots of different products including:

• Secured business loans

• Unsecured business loans

• Revolving credit facilities

• Business cash advances

There is no restriction on the use of the funds, however most lenders like to record what the purpose is, in order to better understand how their clients use their facilities. Popular reasons include:

• Raising working capital

• Covering marketing expenses

• Funding expansion, including the purchase of additional property

• Payment of VAT bills / tax bills

• Covering stock costs

• Covering costs of staff training

• Funding the purchase, refurbishment or upgrade of equipment/assets

• Restructuring of current debt

High street banks have the cheapest cost of funds. However, since the credit crunch strict controls have been placed on the risk they are allowed to take in their lending. This has meant that only mature, stable businesses who can clearly demonstrate affordability can obtain funding from high street sources.

As a result of these restrictions a huge ‘gap’ in funding was created by the high street banks. The need to fill this gap gave rise to what has become known as the ‘alternative’ finance industry. Alternative lenders occupy this space and specialise in lending to businesses who:

• Trading less than three years (have less than 3 years filed accounts)

• Cannot demonstrate affordability (to the level the high street banks require)

• Do not operate in the sectors which banks perceive as being ‘safe’

• Require a very high level of funding

• Require cross collateral funding (funding against multiple assets)

• Have directors who have credit issues

Alternative lenders do have higher costs of funds than high street banks, but they are willing to take on more risk. The great news is that the alternative finance space is flourishing. Peer-to-peer, hedge fund and privately backed lenders are starting up each month. In fact, the UK alternative finance industry has become global leaders, and the envy of economies around the globe.

As brokers we can not only expose you to all these different types of lenders, but also package and present your case in a way which will deliver you the best possible terms, at the lowest possible rate.

Secured business loans enable homeowners to borrow a large sum of money, usually at better rates than an unsecured business loan. The amount you borrow, the term and the interest rate all depend upon the equity you have in your home, your credit history and personal circumstances.

Unsecured business loans enable businesses to borrow money for any business purpose, usually at higher interest rates than a secured business loan. The amount you borrow, the term and the interest rate all depend upon your credit history and personal circumstances.

There is no security required. The lender will check your credibility as a business to determine if they are willing to lend or not.

Revolving credit facilities are a type of credit line that is arranged between a bank and a business. It has a maximum amount where the business has access to the money at any time. This type of credit line is mostly useful for operating purposes and cash flow. The amount you borrow all depend upon the income statement, cash flow statement and balance sheet statement.

Business cash advances are a type of lending based on future revenue. Business cash advances are different to a business loan because instead of having a loan amount, term and interest rate, a business cash advance effectively sells future sales to the lender at a discount.