Many businesses need extra cash every now and then. You could be looking to hire staff, expand or grow into new territories. Either way, many companies in the UK choose to borrow money through a business loan.
Here, we’ll look at the types of business loans, including government business loans, the eligibility requirements and the pros and cons. We’ll also focus on possible alternatives for small business loans.
Who is eligible for a business loan?
Your eligibility for a new business loan will depend on the specific loan you’re applying for. Most will need you to be 18 or over and a UK resident. Others will also require your business to have been trading for a certain period of time.
Lenders will look at your personal financial situation and that of your business. They will focus on your personal credit history and may also need to see a business plan (if your business is a recent start-up) or business accounts (if your business is more established).
If you’re not eligible for a business loan or you’re looking for a personal loan, we can help at Asda Money. We offer access to personal loans through our trusted panel of lenders, that help fund everything from weddings and cars to holidays, home improvements and debt consolidation.
If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
Types of business loans
There are different types of loans for businesses to consider, depending on your financial situation.
Secured business loans: A loan that is secured against assets you own, such as assets like equipment in the business or even your home.
Unsecured business loans: A loan from a lender that isn’t secured against any assets. The amount you can borrow and the loan length will depend on your personal financial situation and the creditworthiness of your business.
Peer-to-peer lending: This doesn’t involve a bank or lender, with the money coming from individuals instead. There are a variety of peer-to-peer (P2P) lending platforms available with different criteria for each. Some will focus on limited companies, and others on sole traders.
Advantages and disadvantages of business loans
- Once accepted for a new business loan, you will get the money quickly so you can invest it into your business immediately.
- You retain control over your business. You won’t need to look for investors who will take a stake in your company.
- Lenders sometimes offer repayment holidays, which can be essential if you have cash flow issues.
- Meeting monthly repayments for a business loan will be another overhead for your company.
- Mainstream lenders often ask for ongoing updates about your business performance and require ongoing financial checks as part of the loan agreement.
- You may face early repayment charges if you want to pay the loan back early.
Business loan alternatives
If a business loan isn’t right for you, there are alternatives. They include:
Credit card: If you need to make a one-off purchase, a credit card could be a quicker way to access smaller sums of money.
Borrowing from friends and family: You may be able to borrow from friends or family, depending on your relationship and their financial situation. You won’t need a credit check, and they may not ask for interest. A written loan agreement is a good idea and helps to make the loan more formal. This will ensure everyone agrees with the amount being borrowed and the repayment terms.
Business overdrafts: Your business bank account may have an overdraft facility – either interest-free or with a small APR. It could be a good option if you need to borrow small amounts for short periods.
Cash-flow finance: This allows you to advance yourself the cash locked up in your invoices. Some business banks offer it, but may charge a higher interest rate than a standard business loan.
Invoice finance: Taking out a loan against the money your customers owe your business. If you’re waiting for customers to pay their invoices, it can be used as security to take out a loan to use straight away.
Crowdfunding: You’ll find a variety of platforms that allow individuals and investors to pledge funds to your business. Many new businesses choose this route as an alternative to a business start-up loan.
Government schemes and support
Since the Covid-19 pandemic, the government has created a range of schemes to help businesses. Some have now closed, but you can still apply for the Recovery Loan scheme until June 2024..
With the scheme, if you qualify for a business loan with a lender, the government will guarantee 80% of the loan. You’re responsible for paying the debt, but the guarantee makes it more likely the lender will accept your application.
To qualify for the scheme, you need to show that your business is trading in the UK and has a turnover of less than £45 million. It also needs to be viable and not in difficulty.
How Asda Money can help?
At Asda Money, we offer personal loans. We work with a carefully selected panel of trusted UK lenders and can help you find the right loan at the right rate for your needs.
You can borrow from £1,000 to £25,000. With just one eligibility check, you can compare loan offers from across our lender panel. If you need more information to understand your finances better and the borrowing options available to you, discover our Financial Support at Asda Money.
Why choose Asda Personal Loans?
The Asda advantage
Known for putting value for money at the centre of everything we do
One simple form…
Receive quotes from a trusted panel of lenders without harming your credit score
Asda service, Asda value, expert providers
A loan offer that’s right for you and your circumstances
Top Personal Loans FAQs:
- Why choose a Personal Loan through Asda?
Customers could access great rates from carefully selected trusted lenders, so you can sit back and let us do the leg work. What’s more, when you search for a personal loan, you’ll only have a soft search on your credit history, which means you can check your eligibility without harming your credit score.
Once your loan is approved, you could receive your funds the same day.
- How does it work?
Asda is in partnership with Aro which is a trading style of Freedom Finance Limited, who are a leading credit broker to offer our customers a different solution to borrowing money and finding a loan. We work alongside Aro so we can provide our customers with the right offer from a panel of handpicked trusted lenders.
With one eligibility check, you can search a panel of carefully selected lenders and provide you with a loan tailored to your needs. Once you have been approved you receive your funds which could be as quick as the same day.
So sit back, relax and let us do the hard work.
- Who are your lenders?
We have carefully selected a number of trusted lenders to be on a panel. You can search the panel to provide you with the very best offer you are eligible for. Find out more about each of our lenders here.
If you have any questions on our lenders, please call our Customer Service Team on 0333 555 0560 and a colleague will be happy to help.
- How much can I borrow?
Lenders offer loans from £1,000 up to £25,000 with repayment periods ranging from 1 to 7 years.
- Will applying affect my credit rating?
No. One of the best things about our service is you get access to a panel of trusted lenders with no credit footprint left on your credit file. When you apply with us, a soft search is completed which doesn’t harm your credit score.
However, if you do proceed with an offer from your search with us, the lender will complete a hard search once you have accepted your offer. This will show on your credit file.
About our trusted provider, Aro
Asda Personal Loans is in partnership with Aro which is a trading style of Freedom Finance Limited, who are a leading credit broker, to offer our customers a different solution to borrowing money and finding a loan. They were awarded Best Consumer Credit Broker in the 2020 Consumer Credit Awards – voted for by customers.
We work alongside Aro so we can provide our customers with their very best loan offer from a panel of handpicked trusted lenders.
With an eligibility check, a panel of carefully selected lenders can provide you with a loan tailored to your needs. It’s also a safe way to find a loan without negatively affecting your credit rating.
ASDA Money is a trading name of Asda Financial Services Ltd who are an Introducer Appointed Representative of Aro which is a trading style of Freedom Finance Limited (company number 06297533) of Atlantic House, Atlas Business Park, Simonsway, Manchester, M22 5PR. Aro acts as a credit broker and not as a lender and is authorised and regulated by the Financial Conduct Authority (FRN 662079).
Please note: If you take out a loan we will receive commission. This will be a fixed amount or a percentage of the amount you borrow depending on which lender you choose.
Terms and conditions apply. UK residents, aged 18 and over. If you take out a loan or credit card, Aro receive payment from the lender. Aro receive different amounts from different lenders and the payment received will be either a fixed amount or a percentage of the amount you borrow. We will not charge you a fee for our services. If you take out a loan, ASDA Money receive commission from Aro and it will be either a fixed amount or a percentage of the amount you borrow, depending on which lender you choose.