Choosing a loan

The type of business loan you choose to take out will depend on what you are going to use the money for and the stage of development and strength of your business. Key business loans include start-up or early stage loans, overdraftsLoans, traditionally provided by the high street banks but now increasingly provided by other lenders, often for smaller amounts to meet working capital and short-term needs and often secured. The loans will be repayable by the borrowers at any time if required by the lenders, will be subject to a credit limit and interest will be payable on the amounts from time to time owing to the lenders. Additional fees will be payable if the credit limits are exceeded., term loans, a revolving credit facilityA business loan facility, usually provided by banks and other lending institutions, which will be subject to an end date, a credit limit and interest on the amount borrowed from time to time. Unlike a term loan, the borrower will be able to make early repayments and then reborrow in accordance with its financing needs. Unlike an overdraft, the lender will not be able to require repayment at any time but can demand immediate repayment if an event of default occurs., asset financeA loan to help a business finance the acquisition of an asset. The most common forms of asset finance are leasing and hire purchase where a loan is advanced by a finance provider and secured over the asset being financed. The cost of the loan is spread over the life of the asset. With leasing, unlike hire purchase, the borrower does not receive ownership of the asset at the end of the finance period., asset-based financeA business loan which is raised against a business's existing assets. This is typically by either selling unpaid invoices to a finance provider, known as invoice finance, or by borrowing secured on a business's assets (which could include unpaid invoices), known as asset-based lending. , and bondsA type of loan. A company can raise money by signing a document called a bond instrument under which it issues bonds to a number of bondholders. Each bondholder will lend money to the company in return for the bonds issued to him, and each bond represents a loan on terms as to interest, repayment and transfer set out in the bond instrument.. This section will help you choose a suitable type of loan for your business and guides you on which types of lender you could approach.