A small scale business loan is a type of short-time loan that can be access to quickly fund your business operations which could be going through a temporary downturn or during a crisis period. In the UK, this type of short-loan can be obtained for few months or years, depending on terms of the loan lender.
You can normally pay weekly or monthly interest until maturity when the entire principal amount of the loan must be paid back in full. Since the liquidity crisis in 2008, loan lenders across the United Kingdom have been cautious to lend money to struggling business owners who also have an adverse credit score.
However, the situation has recently improved dramatically in recent years as the government has partnered with major banks and financial institutions across the UK by pouring fund to small medium enterprises (SME). There has also been a surge in number of online lenders offering unsecured loans with minimum requirements to qualify for them.
Where Can You Get a Small Scale Business Loan in the UK?
In the UK, you can get a small scale business loan through banks, credit unions, Fintech companies, or through online lenders. The process is usually cumbersome with banks, as they typically have strict conditions that need to be fulfilled regarding your business operating history and performance.
The banks also have long application processes and would also require you to place some sort of collateral. There are banks like Yorkshire Bank and Natwest Bank that can offer you small scale loans of to a fixed amount. The major advantages of selecting the 2 banks would be that they are well-reputed and there is transparency with their terms.
Then are other online lenders in the UK that provide unsecured business loans on a small scale basis. The approval takes only a few hours in some cases, and you can get funds transferred to your account immediately. The conditions required to qualify are also less stringent than banks, as they would only require you to have about a few months of constant revenue.
There are plenty of online lenders out there like Funding Circle and Fleximize where you can borrow large amounts if you have a favourable revenue stream. It is also possible for business owners with bad credit history to get a small scale loan from online loan lenders as the requirements are not that strict.
Knowing Your Risks
The risks of your small scale business loan depend on whether it is secured through collateral or not. If you obtain an unsecured loan, you will typically pay a relatively higher interest rate as compensation to the risk faced by loan lenders. Normally, these types of business loans would also entail strict penalties for loan default.
Further, if you miss a deadline for repayment, the situation can become more complicated, depending on the terms of the lender on extending the repayment deadline. You could be forced to pay higher interest on the accumulated debt which could risk your business spiralling into bankruptcy. It is also not easy to judge the reputation of lenders when borrowing a small scale business loan, as most the online loan lenders are relatively new on the market.
How Should You Spend Your Small Scale Business Loan?
You should always have a detailed plan on how you will spend the money in your business and how it will be repaid. There are many ways you can use your small scale business loan, but here is a list of the 5 most important ways it can be used
- Meeting payroll expenses
- Meeting future expenses to buy inventory
- Covering working capital needs
- Resolving gaps in cash flows
- Ensuring liquidity for unforeseen events in the short-term
If you are a small business owner that needs urgent funding to cover gaps in capital or stock up inventory before an important selling period, then a small scale business loan could be exactly what you need if you take all risks into account. If you need a quick business loan and you don’t know know how to get started.
Market Inspector is a B2B digital marketplace for businesses that can help you in comparing loan quotes and offers from qualified lenders for a small scale business loan. B2B digital marketplace strives to ease the life of business owners in Europe in ensuring a fast, simple, and convenient purchasing process, by offering free quotes from leading loan lenders.