The Optimal Time to Apply for a Business Loan

Every business goes through financial problems at some stage. Even Apple, who announced record profits of $18bn for the last quarter of 2014, was once on the brink of bankruptcy before a deal to bring back founder Steve Jobs from NeXT was struck. This is why it’s important to understand when the right time to apply for a business loan is.

What Is a Business Loan?

A business loan is similar to a personal loan in many ways. You are lent a specific sum of money over set period of time, usually several years, and the interest rate and monthly payments you agree to are fixed over this term. You may also be able to loan money on a short-term finance agreement, too, which generally works over a year-long term. While any business can apply for a business loan, there are certain providers who will only deal with limited companies. Similarly, you may need to provide at least two years of filed accounts before a lender will consider your application. Because of the economic crisis, many lenders limited their loans to only businesses who were VAT registered and met a minimum monthly turnover. However, there are many different lenders available, including those who specialise in small business or startups. Find details here.

When Is the Right Time?

The varying kinds of business loans available to you are better suited for different situations. For instance, a short-term agreement may help get through a temporarily rough economic climate, while a start-up loan can also offer a large sum of money to get your business started. If you’re looking to borrow over a longer period if you’re considering expanded your business. If you have to borrow a large sum of money, it may be safer to pay this back over a longer period of time. While you’ll be paying more money back over the long-term, it could help prevent any a future financial crisis.

Other Alternatives

If you’re worried about the accumulating debt, there are other alternatives to traditional business loans. You could consider loaning money against a piece of collateral, such as precious metals, jewellery, or other items of high value. Pawnbrokers like H&T Pawnbrokers offer business loans up to £50k, where your loan is secured against the value of your asset. Once you repay the loan, your item is returned. Most collateral-based transactions work over a six-month term, but you can pay the money back early with no early redemption charges.

The key step to avoiding financial problems is to plan out what you’re going to do with the money before you apply for the loan. You should factor in both the best and worst-case scenarios so that you have a better idea of how much money you’ll need to borrow.

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