Bank loans enable businesses to borrow an agreed amount of money from the bank, with specific terms in place including factors such as the time duration of the loan, repayment instalment amounts and rates of interest.
- Usually secured against assets such as property.
- Evidence required to prove repayment ability.
- Businesses with a strong trading history and healthy earnings are likely to be able to borrow more than start-ups.
You should make sure that your business will be able to pay back the debt before you take out a loan. Repayments are often made in instalments over a number of years, and you'll need to pay off any interest on outstanding debts.
If you're a sole trader looking for a loan, a lender might ask you to provide a personal guarantee or promise to hand over assets like your house or car if you can't repay the loan.
The British Business Bank is a state-backed economic development bank which supports economic growth by bringing together existing government finance initiatives under one organisation. These solutions generate over £660m of new lending and investment for smaller UK businesses on an annual basis.