Bank Loans for Businesses in the UK

Bank credits are tools that can propel a company to the next level. However, it is necessary to know how they work and the possible requirements that the entities will ask the enterprises in order to grant them financing. In this article, I will explain how to request bank loans for British businesses in the UK.

Why You Should Request Bank Loans for Businesses in the UK?

The directors of companies often ask bank credits to meet the upfront costs needed to set up a corporation in the UK. They may be used for the purchase or rental of premises and work equipment, for the recruitment of personnel or for obtaining licenses that are necessary to carry out certain commercial activities in British territory.

However, applying for a credit can also be useful in more advanced stages of the company. For example, they serve to carry out an expansion of the business, to invest in research and development or to design new marketing campaigns.

Steps to Request Bank Loans for Businesses in the UK

1. Opening a Commercial Bank Account

The first step in accessing loans in the UK will be to open a company’s bank account in the country. In addition to giving access to bank funding or, if needed, government grants and subsidies, it will allow us to separate personal from business economy, so we will get a better view of the company’s finances. This article explains its creation process.

2. Creating a Business Plan

Drafting a business plan is an essential step when requesting bank financing. This is because lenders want to make sure that the company will use their funds responsibly and that, above all, it will be able to repay the loan money within the agreed terms.

In this way, a business plan must gather certain points. The first one is market research, in which the competence and potential consumers are analysed. The second one, the commercial strategy the company will follow (prices, business’ location, how we will advertise the products, etc.). The third one, how the production process will unfold. At last, we will elaborate an economic study of the company looking into the next 3 or 5 years. In addition, at the start of the plan, we will gather all these contents into a summary.

3. Analysing the Conditions of each Entity

A fundamental step when applying for a bank loan will be to evaluate the conditions that each entity offers. In this way, you should consider the following factors.

Interest rates and loan repayment periods.
You must find out if the entity requires leaving some asset as a guarantee and what implications it has.
Does the bank allow you to modify the amount that you must pay each month or extend the credit?

Other Funding Options for Businesses in the UK

Beyond bank loans, there are other alternatives to obtain additional funds for a company in the UK. Firstly, there are credit lines. These are sums of money that a bank makes available for a person or business. They will be able to withdraw whatever they need during a period of time. After this, they will need to pay some interests, but only of the money they have taken.

Secondly, there are several ways in which an enterprise may obtain private funding without resorting to banking institutions. On one hand we have angel investors and venture capital funds. In both cases, in exchange for the money they contribute, they receive shares of the business. On the other hand, in the UK, crowdfunding campaigns are popular through platforms such as Kickstarter. In this article I explain in detail what is crowdfunding.

Additionally, the British government makes available to companies a series of financial subsidies and grants. However, the money that the companies will receive with these options will be less than with private financing alternatives.

In ukstartcompany, you will find information about how to establish, register and operate companies with different legal structures and business activities in the UK.