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Manage COVID-19 With An Interest Only Business Loan

Estimated Read Time: 4 Minutes

jessica lambert , 1 April, 2020

Right now, running your business might feel like a long, hard slog with no reprieve in sight. With finances taking a hit amid the Coronavirus pandemic, businesses are struggling to stay afloat, which is why access to additional funding is key for SMEs during this crisis.

One of the biggest reasons why businesses fail generally is that they simply lack having the finances behind them to support growth ambitions, increased demand and when the time arrives, to help overcome financial issues caused by unexpected circumstances.

There are various elements involved in running a well oiled business , but behind every success story will be the one truly defining factor – money. There is a lot of truth to the phrase “you need money to make money” and that is because everything gets a little easier when there are funds to finance each important step along the way.

A lot of businesses in the UK are reluctant to access external funds and with the strain on finances following the economical impact of COVID-19, many businesses are trying to avoid borrowing money altogether.

Last year, Nucleus conducted research on the attitudes of SMEs towards borrowing. We surveyed 500 small and medium sized businesses and found that in the 12 months leading up to the survey, businesses had been reluctant to take out funding, with many SMEs applying for external finance but changing their mind at the very last minute.

In recent years, there have been suggestions that businesses are not borrowing because they are not able to obtain the funding they require. The reluctance of banks to lend to newer businesses and those who are not asset heavy has meant that it has always been more difficult for SMEs to get access to viable commercial loans. Even now, with the Coronavirus Business Loan Interruption Scheme, many smaller and newer businesses simply don’t quality which paints a bleak picture for the future of SMEs.

However, with the risk-adverse nature of banks following the banking crisis of 2008 also came the rise of the alternative lending landscape. Businesses have more options for additional funding than ever before and below we will outline exactly how an interest free loan can enable your business to get through the uncertain months and years ahead.

What Is An Interest Only Business Loan?  

Unsurprisingly, this type of loan does exactly what it says on the tin. With this type of commercial loan, businesses are able to borrow money to spend in the here and now, yet are only required to pay back an agreed figure which surmounts to interest every month for the duration of the term length, with a few options available upon reaching that deadline.

Your business can then either refinance its interest only loan into a term loan or settle the borrowed capital plus one month’s interest at the end of the fixed term.

Interest only business loans differ from the ‘standard’ set up most SMEs are used to seeing and the minimum monthly repayments would provide the breathing space your business desperately needs during this distressing period.

Why Is An Interest Only Business Loan Ideal For Your Current Predicament?

There are two hurdles that lie ahead in the distant future of your business’s journey. Firstly, you need to find a way to survive any severe cash shortages in the here and now, then as we emerge from the Coronavirus situation, your business will then need the finances available to meet growth demands to get it back to a place where it once was.

Using your residential or commercial property as leverage to access large sums of money could help your business find a position of strength during the pandemic.

For businesses that don’t have huge cash reserves behind them to support trying times like the one the majority of UK businesses are facing, an interest only business loan could be the perfect solution. Once the paperwork and property valuation is out of the way, your business would receive the entire sum of money agreed for the loan and better yet, it can be spent on any business related purpose. You won’t be restricted on what you can spend the money on as we understand that you know your SME and its needs better than anyone.

You will be able to use the loan as working capital to allow your business to make a speedy recovery and your business will not have to part with a percentage of its profits each month, nor will it have to bear the brunt of substantial monthly payments regardless of its profitability.

With no requirement to pay back large portions of the loan on a monthly basis, your business will have a chance at truly thriving again and with terms lasting up to five years, your business will be given an adequate chance to regain its standing in the market well before the total loan amount is due to be paid back.

With loan amounts at Nucleus ranging from £25k to £20m, your SME will likely find exactly what it needs in terms of commercial finance with our interest only funding product.

For more SME advice regarding the Coronavirus situation, take a look at the additional resources on our Coronavirus Hub.


1 April, 2020



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