How to Qualify for a Business Loan
How you qualify for a business loan varies between lenders, however there are common criteria that you must meet.
- Have a trading business for at least 1 year
- Provide company financials such as accounts and bank statements
- At least 1 director to be a UK homeowner if a relatively new start business (NOTE not required for long established entities)
- Have a rationale for the funds required
There are many things that are taken into consideration when applying for a loan.
- How long your business has been trading
- Number of company directors/owners/partners/shareholders
- Business financial status
- Is it a profitable business?
- Does it have current debts?
- What is its credit score?
- Existing credit agreements (if any)
- Past debt management behaviour – have you made repayments on time and in full on previous credit agreements
- How will the loan benefit your business?
With this information a bank, a broker or lender can determine possible lending amounts, credit worthiness and loan affordability.
If your company is a partnership then all partners must agree to take out the loan if it is in the company’s name. If your company is a limited entity then providing personal guarantees may not be required but this is dependant upon the strength on the trading entity.
You do need to think about the difference between business loans from banks and those from alternative providers. Business loans from banks are widely available but in more recent times have become harder to get.
Since 2017, business loans from banks have been declining [source: https://www.bankofengland.co.uk/statistics/visual-summaries/businesses-finance-raised]
Alternative finance provider approvals have been steadily increasing making sourcing finance easier for UK businesses. [source: https://www.p2pfa.org.uk/uk-peer-to-peer-lending-data-reflects-continued-maturity-of-the-sector-during-2018/].