Small Business Loan

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Unlike with personal lending, the only place you'll easily get a small business loan is with a bank - most are equipped with business managers for this purpose. Most such loans are secured against your house and if pure cashflow is the issue, you should also investigate factoring.

When you're running a small business, you don't have many options. Big businesses that need to borrow in the millions can go to venture capitalists, angel investors or pursue an AIM listing. Small businesses can't. To make matters even worse, getting a small business loan isn't easy, because all the new lenders don't lend to businesses.

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It leaves you with very few options, the most important being your bank. To have any hope of getting a small business loan out of your bank, you need a good business plan and a good relationship with your bank manager. If you don't have these, then head for Business Link, UK Online for Business, or even your local Citizens Advice Bureau. None of them can give you a small business loan, but they do dispense advice - including for example information on regional grants.

Why won't most lenders lend to business? The official answer is: because plenty of businesses go down due to bad management - which makes it a risky lending policy. That's absolutely true, although it's also a fact that in comparison with the US, the banks are utterly over-conservative, and this is one of the toughest countries in which to get started.

There are some other financing options for a small business loan, and that's by getting a loan secured against your home. If you have any faith in your business, then perhaps this is the acid test. Strangely, few lenders will turn you down now that there's a security against the loan! Don't just speak to your existing mortgage lender - plenty of other lenders (including the business branches of banks) will consider remortgage or secured loan business irrespective of the original lending partner.

One thing to be aware of with secured business loans: you may well have more repayment options than with the mortgage. The banks do recognise that business cashflows are different to personal ones, so the "fixed" and "variable" rate repayments may be augmented with other options; for example artificially low repayments across the term, plus a final "balloon" repayment at the end. Barter for the small business loan deal which suits your business best.

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