Businesses often find themselves in need of a cash injection to buy new stock, refurbish premises, to improve cash flow, or to invest in ambitious growth plans.
Whether you’re a new business or a well established, international company, accessing business finance can be crucial if you want to grow, invest, and evolve. If you’re a small business with the potential for growth, it’s vital that you have access to the finance you need, when you need it most.
But, when it comes to taking out a business loan for the first time, it’s safe to say it can be a daunting process. With so many different funding opportunities, it is often difficult for business owners to know which one will be best for them, not to mention all of the financial jargon and terminology. To make the process easier, we’ve put together a guide to business loan terminology.
Types of Business Finance Solutions
There are a variety of business loans and financing options available. Here at Boost Capital, we offer business loans and merchant cash advances that can work in conjunction with many of the other facilities available to small businesses, including:
- Bank Overdrafts
- Commercial Mortgages
- Development Finance
- Bridging Finance
- Leasing and Asset Finance
- Vehicle Finance
- Factoring and Invoice Discounting
To read more about different finance solutions visit our types of business funding page.
Types of Business Loans
There are a number of different business loans available in the industry, including:
Unsecured loans are flexible loans that can be used for a wide variety of requirements, including working capital, asset purchase, and business expansion. You require no assets when you apply through Boost Capital and for UK based small to mid-sized businesses we are a direct funding source and leader in unsecured business funding solutions.
Secured loans are flexible loans that can be used for working capital, asset purchase, business expansion, and more. When taking out a secured loan, the lender will take a charge over assets in the business to act as security for the loan. A personal guarantee may also be required.
Asset finance is a business loan that is used to purchase or re-finance an existing asset. A charge over the asset is held as security until the loan is repaid.
Small Business Loans
Small business loans allow small businesses to access short term lending quickly and simply. Short term loans can be used for a variety of reasons such as purchases, renovations, expansions, equipment, as well as cash flow and they are available for most business types. If you apply through Boost Capital there are less regulations than bank loans and approval is based primarily on recent trading history and the overall health of your business.
The repayment period, or term length, refers to how long you’ll have to pay back your business loan.
Loans are repaid in equal monthly instalments over the agreed term of the loan. The term you choose will determine the monthly repayments. It’s usually advisable to choose as short a period as you can, whilst still keeping your repayments affordable.
Small business loans are typically repaid sooner than a traditional loans from the ban, usually being paid within 90 to 120 days. At Boost Capital, we offer term lengths ranging from four to 18 months.
Lenders typically display their rates as an annual percentage rate (APR), which shows the total cost of borrowing over 12 months. The APR must include all of the standard costs involved in taking out a business loan, including any application fees charged by the lender.
However, it’s important to remember that many short term business loans, including those offered by Boost Credit, don’t have an APR because repayments are based on a flat rate, which is risk adjusted.
A fixed rate business loan is where the interest rate doesn’t change during a set period of the loan term. This means that you will know exactly what you’re paying each month.
Early Repayment Fees
If you decide to repay your loan before the full term is up, then you might face an early repayment penalty.
At Boost Capital, you can pay your loan in full at any time without facing a penalty. We only charge interest for each day you have the funding, so by repaying the loan early, you can reduce the amount of interest you pay.
Some lenders will charge arrangement fees for business loans, this is essentially an admin fee covering the cost of setting up the loan.
We hope this guide has helped you understand more about business loans terminology. For more questions on Boost Capital Business Loans, visit our FAQs Page or call us on: 0800 138 9080