There is a vast array of different loans available to businesses and it is often very difficult to know which business loan is right for you. The following guide explains the different types of business loans available and what you should be looking out for in order to choose the right one for you.

If you’re a new business owner then you’re probably looking to secure a large loan amount to get your company up and running as quickly as possible. The best type of loan for you may be a short-term business loan. A short-term business loan provides you with access to immediate funds and will normally need to be paid back within a twelve month term. These loans will either be provided as secured (normally against stock or property) or non-secured. However, it is important to note that many banks will not be willing to provide a business loan to companies who do not have a long trading history or have not yet become a limited trading company.

If your business is well established and you’re looking to secure additional funds to expand your company then a long-term business loan may be the ideal solution for you. These business loans are normally provided on a three to five year term and will be dependent on your business development needs. The interest rate for your loan will normally be calculated on what type of risk the bank thinks your business offers and they will look to establish both your current and historical business finances before offering either a secured or non-secured loan.

Short and long-term business loans cover the two most well-known types of business loans. However, there are some additional loan options that are also available to you.

Businesses can often find it a struggle to ensure invoices are paid on time. This can mean you’re doing really well in terms of business but are unable to convert this into real cash. Banks can agree to provide invoice financing which provides funds against those invoices which you may be struggling to receive payment for. The bank can choose to take over responsibility for the invoice and collect the money themselves. Or, they can provide a loan amount against the outstanding invoice and ask you to pay them back in instalments against the outstanding invoice amount. .

Another alternative option is to take out an asset finance option. Asset finance allows you to apply for a loan against those items which are essential to your business such as vans or company cars. An asset finance loan means that your company can lease the necessary equipment during the loan and, depending on the loan terms, you would then own the equipment outright at the end of the loan agreement.

The different types of loans available mean that you need to be sure that the loan you’re taking out meets the specific requirements of your business. However, as long as you have worked out a sensible payment plan and are confident that you will be able to cover the costs over the period of the loan, they offer an ideal way for businesses to access essential funds.