You’ll need to be able to meet certain requirements, such as being over a certain age or having a certain income level, before you can apply for a loan.

This involves borrowing money over a fixed term with no security. Many small businesses use this type of finance where they don’t have secured assets to borrow against. Examples include credit cards and personal loans. However, it can be an expensive way to borrow money and is dependent on your credit rating.

You can offer something you own as security or collateral on a loan, making it a secured loan. This could be property or stocks and shares, or something else of value. The lender ‘holds’ this to protect their investment when they lend you money. In return, the debtor often gets a lower interest rate, but people can risk losing their home if they ca [..]

This fee is charged on the undrawn balance of a committed lending facility. It’s the minimum amount in fees you will pay irrespective of the amount you borrow.

A personal guarantee is an agreement whereby an individual, usually a director, is responsible for the debt if the borrower fails to repay it. This means that personal assets such as the family home are in jeopardy if the creditors call in the loans on a business.

Management accounts provide a historical perspective of a business. They help plan and control the activities of a business over a specific period, often referred to as a trading period. While there is no legal requirement to prepare management accounts, lenders will usually ask to see them as part of the application process for business finance.

Invoice financing is where a third party agrees to buy your unpaid invoices for a fee. Invoice financiers can be independent, or part of a bank or financial institution. There are 2 types of invoice financing in the UK – factoring and invoice discounting.

If you agree to pay a fixed interest rate on your loan, the interest rate will not go up or down over the borrowing period. You’ll pay the same rate for the whole term. If you choose to pay a variable interest rate, the interest you pay will go up and down in accordance with market rates.

The headline rate is the APR (annual percentage rate) at which a loan is advertised. This may not be the rate the lender will give you when you apply – you may end up paying more, or in some cases less. Lenders must offer the headline rate to 50% of successful applicants, but you may not be one of them.

A company or corporate borrower makes an agreement with a lender that gives the lender a charge over the assets of the borrower to secure the loan. The debenture is registered at Companies House for all to see and lays down the rights of the lender and obligations of the borrower. The borrower is not permitted to dispose of the asset without the le [..]