This section provides generic information only and should not be construed as advice
4 Ways a business loan can help you to take your business to new heights11/03/2019
If you have ambitions to grow your business and take it to new heights then a business loan may be able to support you.
Before approaching lenders, do make sure that you are clear about the type of loan that you need for your business, whether this will be secured against business assets or unsecured, whether you need short or long term finance and how you will fund repayments.
Here are four ways that a business loan could be used to help your business growth
1. To fund new premises to expand operations
If your business is growing then it is possible that you will outgrow your existing premises. Or perhaps you are looking to expand into a new region and need new premises to service it. If you are looking to purchase land or buildings, then you may be looking at a long-term loan or mortgage secured against the asset. If you are leasing rather than purchasing, then additional financing may still be needed for alterations and fitting out of new premises.
2. To purchase new plant or equipment
Your business may need new plant or equipment to upscale operations, keep pace with competitors or branch out into new areas. You could buy this outright - using either cash or a loan - or you could decide to rent or lease it instead. There are advantages and disadvantages with both options. If you have cash available, then an outright purchase is often the cheapest option in the long term but paying the full cost of the asset up front can affect your cashflow. Leasing generally offers more predictable regular expenditure and an ability to keep up to date with changing technology but may lock you in to inflexible long-term agreements.
3. To buy seasonal stock
Some small businesses are seasonal in nature, particularly retail businesses. If your business makes most of its sales during the holiday season then you will want to purchase most of your stock before it. Bank loans to purchase inventory are generally short-term in nature, secured against the value of unsold products and usually paid off after the season is over with the proceeds of sales from their seasonal sales.
4. To increase working capital
Working capital is the money you use to manage your day-to-day operations. Small businesses sometimes need loans to meet their daily operations needs until their earning assets are sufficient to cover their working capital needs. Banks sometimes loan short-term money to small businesses to enable them to get off the ground and grow. As the business grows and their own assets enable them to earn money, they can repay the working capital loan to the bank. Working capital loans may have higher interest rates since some banks consider them riskier.
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