Loan Finance

 

What is it and How does it work?

 

Business lending includes commercial mortgages (loans used to purchase buildings), equipment lending, and loans intended for expansion. Loans will have a fixed term and the interest rate applied can be either fixed or variable. Capital and interest repayments will be scheduled over the term of the loan.

 

The main providers of loan finance to the SME/Start-Up sector are the banks (listed below). While there is much talk about the amount of loan finance being made available to the SME/Start-Up sector the banks confirm they are very much open for business. The recent establishment of the Strategic Banking Corporation of Ireland (SBCI) by the government has added a further €400m of funding aimed specifically at the SME/Start-Up sector.

 

Alternative sources of lending are emerging.  



 

Short-term business loans

Most businesses will need to borrow money at some stage either to help with cashflow, or to pay for expansion costs, and a short-term business loan can provide the ideal solution. Although recent years have seen a reduction in the number of business loans on offer, there are still plenty of options available to explore.

 

A short-term business loan can be invaluable for businesses that need a cash boost if they are expanding, or if they need a bit of extra help to manage their cashflow.

 

This type of loan usually has a term of six-months, so will need to be repaid quickly. You can usually choose a fixed rate of interest, so you know repayments will be the same every month, or a variable rate, which could mean your repayments change over time.

 

Advantages of short-term business loans

The main advantage of opting for a short-term business loan is that you know your business will only have to make repayments for a limited period of time. You will also usually pay less interest overall than if you opted to repay what you owe over a much longer term, such as five years.

 

Disadvantages of a short-term business loans

Choosing to take out a short-term business loan may mean that you will be able to pay off what you owe quickly, but bear in mind that your repayments will be much higher than if you opted to repay your loan over a medium or long-term period. Interest rates can be very high on short-term borrowing, so it’s worth comparing lots of different loans to ensure you find the right deal for your business’s needs.

Difficult economic conditions in recent years have made it harder for businesses to borrow money. To apply for a business loan, your business may be required to have a minimum monthly turnover, and you may have to show a set number of accounts, usually two or more years.

Remember too that the actual rate of interest you will be charged on a short-term business loan will depend on your business’s individual circumstances, the amount you want to borrow, and over what period you intend to pay off what you owe.

 

Alternatives to a short-term business loan

If you don’t think your business will be able to pay off any borrowing over a year or less, then you might want to consider a medium or long-term business loan which can be repaid more slowly.

Other options include using a business credit card for any immediate expenses. These can also be a useful way to manage staff spending. You could also speak to the provider of your business bank account about arranging a business overdraft which can provide you access to funds as and when you need them. You can usually arrange an overdraft for a 12 month period, at which point it will have to be renewed.

Businesses can also raise funds though cashflow finance, which allows them to borrow against the value of their unpaid invoices, or they can borrow against their assets such as any equipment or property.

 

Banking

Medium to long-term business loans

Most businesses need a financial helping hand to either get them off the ground or expand and a medium to long-term business loan can be one of the best ways to get funding. It’s not as easy as it once was to find business loans, but the major banks still all offer them and if your business plan, credit score and homework is all in place, it’s certainly worth applying.

 

Setting up a business or expanding your current one can be expensive. Some people opt to fund it themselves but for many, this is impossible and chances are you’ll need financial support.

 

The reason many business owners prefer a medium to long-term business loan is so they can be certain that they will have funding in place to support their enterprise for several years. In turn, this will help them plan and budget.

Here, we take a closer look at some of the advantages and disadvantages of medium to long-term business loans…

 

Longer term loans

A medium to long-term business loan typically enables you to borrow money to help your business for one to five years.

The loan is repaid in monthly instalments, with interest added to the amount you owe. Some business loans have a fixed rate of interest, which means your payments won’t change over the term of the loan, while others have a variable rate, so the amount you owe could vary over the loan term.

 

Setting up a business or expanding your current one can be expensive. Some people opt to fund it themselves but for many, this is impossible and chances are you’ll need financial support.

 

The reason many business owners prefer a medium to long-term business loan is so they can be certain that they will have funding in place to support their enterprise for several years. In turn, this will help them plan and budget.

 

Here, we take a closer look at some of the advantages and disadvantages of medium to long-term business loans…

 

Make sure you know which type of loan you are getting as this could have a real impact on budgeting for your business.

Advantages of a medium to long-term loan.

 

Advantages of a medium to long-term loan.

A medium to long-term business loan can help with all the costs associated with setting up a business, from cashflow to expenses and paying staff.

 

The longer the term of your loan, the lower your monthly payments will be, as you are spreading the cost over a longer period of time. This can be useful when you are trying to get your business off the ground, as it means you won’t have to make high monthly payments at a time when there will invariably be plenty of other set-up costs to consider.

 

Disadvantages of a medium to longer term loan

Taking out a business loan over a longer period may mean that your payments are lower than if you’d opted for a shorter term loan, but remember that ultimately this means you will pay more interest overall.

 

How much interest will you pay?

The amount of interest you must pay on a business loan will depend on your individual circumstances, including how much you want to borrow and over what period of time. If your business is just starting out, the lender will usually want to look at your personal credit rating to give them an idea of how responsibly you manage your money. The higher your credit score, the more likely you are to be offered a loan at a competitive rate of interest.

 

Alternatives to medium to long-term business loans

As well as loans, there are several other ways that business can secure funding. You may, for example want to use a business account overdraft which can provide you access to funds as and when you need them, making them useful for any unforeseen expenses. Business overdrafts are usually available for any period up to 12 months.

Alternatively, you may want to consider a business credit card. These can provide a useful way to manage staff spending and usually give up to 56 days interest-free credit.

Other options include cashflow finance, which enables companies to borrow against the value of their unpaid invoices, and borrowing against assets, for example your business’s property or equipment.

BANKING -Short & long term loans

 

HELPING BUSINESS GET THE FINANCE IT NEEDS

At Bank of Ireland, we recognise that businesses need the right kind of funding support to succeed. The good news is, we have credit available and we want to lend. So whether you have an idea for a new business start-up or you are an existing business owner, we want to talk to you.

 

 

Bank of Ireland

AIB

HELPING BUSINESS GET THE FINANCE IT NEEDS

At Bank of Ireland, we recognise that businesses need the right kind of funding support to succeed. The good news is, we have credit available and we want to lend. So whether you have an idea for a new business start-up or you are an existing business owner, we want to talk to you.

 

 

Ulster Bank

HELPING BUSINESS GET THE FINANCE IT NEEDS

At Bank of Ireland, we recognise that businesses need the right kind of funding support to succeed. The good news is, we have credit available and we want to lend. So whether you have an idea for a new business start-up or you are an existing business owner, we want to talk to you.

 

 

HSBC

Credit and lending

Get access to a range of long and short-term loans designed to meet the specific funding requirements of your business. Use our lending and credit solutions to finance capital investments and business growth, and obtain working capital to improve your cash flow, or manage day-to-day expenses more effectively. Our specialists have a wealth of experience customising lending programmes to suit the requirements of all types and sizes of organisations.

SBCI Bank

WHAT IS THE SBCI?

If you have big plans for your small business, the SBCI can help you fund them.

•A new, strategic SME funding company, the SBCI’s goal is to ensure access to flexible funding for Irish SMEs by facilitating the provision of:

•Flexible products with longer maturity and capital repayment flexibility, subject to credit approval;

Lower cost funding to financial institutions which is passed on to SMEs;