Understanding and Arranging a Business Loan

Businesses often borrow money from banks or other financial organisations. The method of borrowing can take different forms, but however it’s done and whatever it’s called, it’s going to be a type of business loan.

There are plenty of different reasons why businesses need to borrow. These include:

  • Buying new plant or equipment.
  • Developing a new product or service.
  • Overcoming a short term cash flow problem.
  • Financing the purchase of another business.

Different Types of Business Loan

If you speak to your bank about a business loan you’ll discover they have a number of different products available. These vary in cost and flexibility.

The most flexible type of business loan is an agreed overdraft. This allows you to borrow money from your bank when you need to. You pay interest on what you borrow, and a fixed fee for the right to use the facility. It keeps you in complete control.

Other forms of business loan include commercial mortgages and loans for purchase of specific assets.

Whatever sort of loan you take, banks and other lenders will want some form for security from you. Even if you agree an overdraft, they will often insist that you submit a personal guarantee. That means if the business can’t afford to repay its debt, the bank can come after you instead.

The Invoice Finance Alternative

n increasingly popular way for a business to borrow money is Invoice Finance. This takes the form of Invoice Discounting or Factoring.

They both operate in a similar way. A bank or other lender advances you money based on the value of your unpaid sales invoices. That means the more you invoice the more you can borrow, and you know it will be repaid when the customer settles their bill.

The difference between them is that Invoice Factoring also allows the lender to take over the process of managing your debtors. They prepare statements and chase for payment, allowing you to concentrate on running your business.

Advantages of using Invoice Finance include:

  • It gives instant access to cash as soon as you invoice.
  • No assets as used for security.
  • It’s flexible, allowing you to borrow what you need.,/
  • It can be operated confidentially, so your customers are not aware.

Want to know how much you could borrow through Factoring? Get an online quote now.

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How Touch Financial Can Help

We’re the UK’s leading online commercial finance broker. Because we are entirely independent we are completely impartial. Our aim at Touch is simple – to save our customers time and money by helping you arrange finance to fuel the growth of your business.

We help over 500 businesses every month find the right finance solution to help grow their business. Contact us today for a free consultation and find out how we could help!

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Every month Touch Financial help businesses improve their cash flow with invoice finance. Request a quote to find out how much extra cash you could raise.

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