Business Loan

Business loans are designed to assist our client with major investments in the future of your business. To qualify for a business loan you will, of course, need to be running a registered business. You'll also need to demonstrate that you can easily repay the loan, by providing documentation of your business’s financial history and assets and liabilities, including any other loans. You'll be required to provide security for the loan, in the form of either residential or commercial assets. The business loan could require both for SME and large. A variety of general Business loan options for the large business. There are different types of business loans available in the market today which require the borrower to put up some form of security such as their business premises.

Another option is to provide a residential property as security (this is also known as a business mortgage loan). This option is only available if the property doesn’t have a substantial existing loan (such as a mortgage), and is subject to the property being accepted as suitable security by the business loan provider. However, using a residential property as security can significantly reduce the interest rates charged.

Fixed business loans

Payments are set at a fixed interest rate and remain the same for the life of the loan, which can provide certainty around repayment amounts. However, interest rates on a fixed business loan are often higher than market rates. Some lenders will allow fixed business loan holders to make additional repayments (usually up to a set limit per year). This can be a good option for a business where cash flow has improved and there is an opportunity to pay off the loan sooner and reduce the interest incurred.

Variable options for business

A variable business loan allows greater flexibility, but as interest is calculated on an ongoing basis against market rates, it provides less certainty around future repayment costs. Different lenders also offer different repayment options, with some enabling reductions to interest-only payments for a period of the loan. Additional payments may be made without penalty, and some lenders will also allow a redraw facility on their variable loans, enabling the business to access funds without having to create a new credit facility.

It\'s also possible to create loans with both a fixed and variable component, giving you the best of both worlds.

If you\'re looking for a business loan, talk to your Mortgage Choice expert. They can help you understand the options available and do all the legwork in sourcing you the business loan that\'s right for you.

Small business loans

There are a great variety of loans available to businesses. A business loan can be structured either on an upfront basis, where the entire value of the loan is withdrawn at once and paid back in regular instalments, or it may be on call, with payments determined by the amount of the loan that the business has drawn down.

Building your business

A second loan type is a Term Loan, which is a fully drawn advance aimed at funding long-term business investments that improve the earning potential of the business, such as new equipment. A fully drawn advance will generally be structured over a fixed term with scheduled repayments, and will be secured by a mortgage over a residential or commercial property, or other acceptable assets.

The use of security generally means that the interest rate will be lower than for other business loans, and it may be structured to a fixed interest rate that delivers certainty in terms of repayments.

If the goal of the business loan is to provide access to capital equipment, another option could be lease finance. This is where, for example, the business enters into a contract with a finance provider who buys the required asset, and then the business leases the use of that asset for a fixed amount over the life of the contract. When the contract ends, the business has the option to renew the lease on the existing equipment, take out a new lease on new equipment, or arrange to buy the leased item outright.

Business credit fitness

To qualify for a small business loan, your business must be in sound financial shape. It may also help if you can provide some form of security against the business loan, such as commercial or residential property. If the loan is unsecured it is likely to come with a higher interest rate.

If you're seeking a small business loan, talk to your Mortgage Choice expert. They can discuss the different business loans and providers to find the small business loan that will be best suited to your business.

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