Take your business further with a business loan

Term loans are business loans with a fixed repayment schedule and a predetermined end date. These tend to be long term business loans, and are best suited for projects where you’re confident in your ability to meet the payments every month.

As you would expect, short term business loans are designed for immediate needs. ‘Short term’ in this scenario means they have a term of a year or less and are quick to fund. One important thing to consider is that interest rates for short term business loans will usually be higher, as you’re likely to pay more for the speed and flexibility of the product.

Lines of credit are built around flexibility – they allow businesses to draw funds as needed up to a set limit. Once you reach that limit, the arrangement ends. These can be useful when you’re not sure how much you need and want to stay in control of how much you borrow and when.

As the name suggests, equipment financing is meant for purchasing business equipment. That’s because these loans use the equipment itself as collateral. This can be ideal when you need to use equipment to generate revenue, which helps repay the loan.

Invoice financing allows businesses to borrow against the amounts due from customers, providing immediate cash flow. This can be useful if you have a large number of unpaid invoices, providing short term relief and flexibility.

Similar to invoice financing, merchant cash advances are finance based on sales – except here it’s your future revenue. Here, the lender provides funds in exchange for a portion of daily credit card sales, repaid on a flexible term until the sum and interest are repaid.

The cost of a small business loan in the UK can vary significantly based on the type of loan, the loan amount and the term length. For instance, an iwoca business loan starts from 2% per month.

Secured business loans require you to offer business assets (collateral) against the loan which the lender may seize if you default. They tend to have lower interest rates and allow you to borrow more compared to unsecured loans.

Unsecured business loans do not require any collateral and are typically quicker to arrange than secured loans, although the lender may require a personal guarentee. An iwoca Flexi-Loan is an example of an unsecured loan.

A good credit score varies depending on the rating agency in question, but generally the higher your score, the lower your perceived risk. It’s worth noting, however, that your credit score alone is usually insufficient to determine your eligibility for a business loan. Most lenders consider many factors, including financial history and business performance.

The main thing lenders want to know is if your business is healthy. This includes checking if it has defaulted on debt, has any outstanding County Court Judgments (CCJ), and has a solid customer base with steady revenue.

Securing a small business loan with bad credit can be challenging but not impossible. Here's how you can improve your chances:

• Understand your credit score: Before applying for a loan, understand your credit score and what factors led to it. This insight can help you plan on how to improve it
• Improve your business’s financials: Showing that your business is profitable or improvement in its financial health can make you a more attractive loan candidate
• Consider alternative lenders: If traditional banks have turned you down, consider alternative lenders. They often have more flexible requirements and are more willing to work with businesses that have poor credit
• Provide collateral: If you have assets that can be used as collateral, this can increase your chances of securing a loan.
• Seek a co-signer: If you can find someone with a strong credit score to co-sign the loan, lenders may be more willing to approve your application. However, this can be risky as the co-signer is equally responsible for repaying the loan.

Remember, obtaining a loan with bad credit can come with higher interest rates. It's essential to weigh your options carefully to avoid further financial strain.

Business loan insurance is not a legal requirement, but some owners consider taking it out to help give them peace of mind. If the business owner dies or becomes seriously ill, any outstanding loans can have a significant impact on the business and its employees.

Some insurance providers offer a lump sum payment when a director dies or falls critically ill. The lump sum will usually be equal to the outstanding balance on the loan. In return for this, you’ll be expected to pay regular premium payments to the insurance provider.

iwoca business loans follow a monthly repayment schedule, with minimum repayments due once per month. Your first repayment will be due 30 days after drawing down the loan.

This will depend on the term length of your loan. For an iwoca business loan, this will range between 12 months to 60 months. Although you may not have to hold the loan for the full term: with iwoca, you can repay your loan early anytime, with no early repayment fees.

No! It’s free to get a quote from iwoca - you only choose whether to go ahead once you have received an offer. You also have a 30 day drawdown window, so you don't have to decide whether to take the funds right away.

Absolutely! You don't even have to wait until the loan has ended, as you'll also be eligible to apply for a top up once you’ve repaid between 15-33% of your loan, depending on the loan term. We’ll just need some fresh info about your business to make a decision.

For many customers, we only need to see your recent bank statements. Although for larger, more complex applications we may also ask for VAT returns and company accounts. For more details on the iwoca application process, read our guide on how to get a business loan.

You can apply for an iwoca Flexi-loan, which is an unsecured business loan. Unsecured loans do not require collateral, although you may be required to provide a personal guarantee for security.