FAQs

Are Business Loans Hard to Get?

Business loans are not necessarily hard to get provided you are open to receiving finance from organisations other than banks. Banks are renowned for having strict tick-box criteria does not suit everyone, so it is vital that businesses are open to exploring other, less traditional avenues when they seek more flexible terms.

Factors Affecting Business Loans

The willingness of a lender to grant you a business loan depends on many factors. If the financial climate is not favourable, banks may not easily approve your request for a business loan. If the market is financially sound but the bank has already reached its investment limit for the specific industry which your business belongs to, the loan application may also get turned down. Alternative lenders are less likely to be restricted by these sector quotas.

For most lenders, credit score is also a major consideration, be it business loans or personal loans. Lenders carefully scrutinise the business owner’s credit history and if it doesn’t meet their minimum criteria, they may not grant the loan. Most lenders will also factor in affordability, your ability to manage the repayments, whatever they may be. Usually, the better your credit score, the cheaper the rate.

Besides the reasons stated above, banks are also known to have tough rules pertaining to repayment that businesses must comply with in order to secure a loan. All these factors make it quite difficult for businesses to get business loans from banks in times when they need it the most.

Alternative Finance

Business owners often hesitate to apply for business loans. Those who have been previously turned down by banks may begin to believe that they may be ineligible for investment or feel let down. There is also a commonly-held misconception among business owners using external finance is somehow a negative reflection on their ability to manage their business.

However, the financial landscape has evolved greatly over the last decade. Businesses are no longer restricted to just borrowing from their high street bank. Over the last decade, the alternative finance industry has grown to emerge as a massive support for small and medium sized businesses.

Faster Growth

Banks have not been able to adapt themselves as quickly as alternative finance providers. When it comes to facilitating speed and accessibility to finance, which is the primary requirement of most businesses seeking finance, the alternative finance sector is leading the way. Some banks are partnering with technology-led lenders in order to offer their services to their existing customers and retain their business.

The rise in the number of start ups in recent years shows that the UK’s business professionals are embracing an entrepreneurial spirit  Already the SME sector accounts for over 90% of employment and their has never been a bigger appetite for pursuing creative and innovative business ideas. However, for some business owners, their can be fears about how to secure funding and this uncertainty increases even further when their loan applications get turned down by traditional funding providers, such as banks.

Entrepreneurs often fear that receiving funding may force them to relinquish control over their business. They also hesitate in applying for funding as they believe that receiving external finance may add to their worries. Some business owners are also sceptical of the present economic climate which also holds them back from applying for business loans and making decisions.

Getting a business loan is commonly believed to be a difficult affair, but with online applications and technology enabled processing, this is changing and becoming faster. There are many options of funding that are now available to entrepreneurs – to find the right fit, you just need to know how to look, to ensure that you find the provider who can enable access to funding for working capital, not just gets the bills covered but also helps businesses to grow.

With the right funding, businesses can upgrade machinery, fulfil large orders or solve challenges presented by cash-upfront discounts with dispensable money to help them negotiate better deals. Your relationship with your lender should feel like a partnership, providing you with funding support so that you can focus on achieving your business goals.