With literally thousands of different loans available, choosing the one that best fits your needs can be likened to navigating a minefield. The type of loan that you apply for will depend on your business requirements, whether you have security or not, and the length of time you’ll need the funds for.
Most importantly, though, it should marry up with the purpose of your loan – are you starting to see a pattern here?
Purpose
As mentioned earlier, the purpose of your loan has less to do with how you’ll use the funds and more to do with what your business goals are and how the loan will help you get there quicker. You’re at the stage where you’re ready to grow your business and you know that you can only do this by getting some finance: whether it be purchasing new equipment, refinancing existing debt or having access to funds for better cashflow.
When you know exactly what your business goals are, the right financial product becomes a lot easier to choose.
Security
The type of finance you can get access to will also depend on whether you have security available or not.
Security can come in the form of physical assets that you own (equipment, vehicles or property, including your own home) or from less tangible means like the value of your business. A third-party guarantee – where someone else offers security for your loan – is another option you could look at.
Secured loans offer lower risk to the lender because – should it all go pear shaped – there is a sellable asset from which they can recover funds still owing. They’ll be willing to lend you more money at a lower interest rate if there is a valuable asset that the loan can be secured against.
Unsecured loans can be a lot more convenient, but generally come with a higher interest rate attached. There may also be significantly lower limits to how much you can borrow without security as backup.
Timeframe
Knowing how long you’ll need the funds for will also help to determine what financing option you choose.
Developers may only need funds for 6-12 months until construction has been completed and the property sold. Business owners that wait on 60-day invoices may need long-term –access to funds for improved cashflow, such as an ongoing line of credit.
OK – now that you’re set on the basics of purpose, security and timeframe, it’s time to take a closer look at our range of finance products to see what’s on offer.