Debt finance

How can my business secure a business loan and what if I fail to meet business growth targets and can no longer afford to pay the interest owed?

Loan and debt finance is offered by many lenders, including banks, community finance institutions and a raft of alternative providers, to startups and small businesses. Terms will vary depending on business trading record, intended use, term, security and company balance sheet. Loans are typically used for startup capital or for purchasing equipment, where loans are linked to the useful life of equipment or assets.

Loans have an interest element, which is typically paid monthly, and capital repayment, which can be repaid over the duration of the loan or at its term. Loans can either be secured against company or personal assets, or unsecured for typically smaller amounts. The interest rate charged will vary depending if it’s a fixed rate for the length of the loan or variable rate linked to the bank of England base rate.

Loans are typically inflexible and if you fail to make repayments (the interest rate may have risen if your loan has variable rates, or your income or costs are not in line with forecasts) you could lose your loan security, including personal property or company assets. With debt finance, entrepreneurs retain ownership of your company and profits, although profits are reduced by interest payments. Control is also retained, subject to keeping up interest payments.

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