How to Choose the Right Financing Option For Your Small Business

Determine Your Needs

Consider Rates & Terms

Research Lenders

Compare Your Options

Summary

Every entrepreneur needs access to appropriate funding to ensure their business is successful. With the variety of funding options available, it can be a daunting task to choose the right type of funding for your business.

The first step is understanding the different types of business funding available. Depending on the size and stage of your business, you will benefit from different types of funding.

At Love Finance, we work with a wide range of lenders, in addition to lending money from our own book. 

There are many options and variables that will change depend on your needs. 

Business loans are a popular option for many entrepreneurs, but not all loans are equal. Depending on the specific needs of your business, the right loan could be anything from a term loan to a merchant cash advance. Here's your guide to choosing the right type of funding for your business.

Determine Your Needs

The first step in choosing the right type of financing for your business is to determine what you're looking for. What type of loan do you need? How much money do you need? What is the repayment timeline? Knowing the specifics of what you want and need will help narrow down your loan options.

Think about what your business needs and what you are looking to get out of the finance.

This can also help you work out your budget and what type of repayment to look for, as you'll be more aware of your affordability. If you need some assistance with this, you can use our business loan calculator to estimate your monthly payments. 

Consider Rates & Terms

Interest rates and repayment terms are some of the most important things to consider when you're looking for finance. 

Generally speaking, the shorter the repayment period, the higher the interest rate. You should also consider any loan fees you may have to pay. Some lenders may charge early repayment fees, but this is not the case at Love Finance. 

We offer terms ranging from 3 months to 5 years. Generally, you can choose the term that suits you, but the health of your business may influence this. 

Rates and terms are two of the most important factors for you to consider as they affect repayment.

A short-term loan is often best suited for immediate financial needs, such as covering an unexpected expense or making a large purchase. Short-term is usually more expensive and carries a higher interest rate than a long-term loan, but it is often easier to qualify for since the repayment period is shorter - making it less risky for the lender.

A long-term loan is best for larger projects or investments that will benefit your business in the long run. This type of loan typically has a lower interest rate and longer repayment period, making it an ideal choice for large, long-term investments like real estate or equipment. However, it can take longer to qualify for since lenders may look more closely at your credit and financial history.

Research Lenders

Once you've narrowed down your loan options, it's time to research lenders. 

Once you have a clearer idea of the type of finance you're after, you can begin to research the provider, as you'll be able to communicate your needs effectively. 

As a busy business owner, dealing with a lender can be stressful with all the back-and-forth. Often it makes sense for a small business to opt for a broker than a direct lender. Brokers manage the paperwork and long-winded communication, and break it into straightforward terms for you.

Using a broker is often the most efficient way to get finance for your small business.

Here at Love Finance, our account managers just require a short call to confirm some details about the business. They can then take this information to approach the most appropriate lender for your funding request. This makes it easier for you as you don't have to search for lenders yourself.

Compare Your Options

There are many different types of business loans available, so it’s important to understand the differences between them and find the one that fits your individual needs the best. By comparing your business loan options you can make sure to get the best terms possible for your loan.

If your business takes card payments, you could look at a merchant cash advance. This is a card payment loan that allows you to borrow up to double your monthly card sales. This type of funding is manageable as you only repay when you make a sale, and this is taken automatically. 

Love Finance offers a range of finance products. You can research these yourself or ask your account manager for guidance on the best one for your needs.

Asset finance is best suited for businesses that need to purchase expensive assets that they wouldn't be able to afford outright. This type of financing allows businesses to purchase assets such as machinery, vehicles, and other equipment without making a large upfront payment. You can then use said equipment to maximise your output and increase profits.

VAT finance is a type of loan specifically designed to help businesses cover their VAT payments. These types of loans can help businesses access the cash they need to make their VAT payment on time, without having to wait until they receive payment from customers.

Love Finance business loans can be used for any business purpose, whether it's cash flow repair, inventory funding, tooling finance, business expansion, or anything else you need for your business.

Enquire with us here, or on any of our relevant pages, and you could be funded in as little as four hours, allowing you to get the funding you need efficiently. 

Summary

The right financing choice for you will depend on the industry your business is in, how much money you need, and what you need the funds for. This will vary from person to person but as long as you do your research, you'll be able to find the most appropriate option for your business.

Finding the right type of financing is a critical part of launching and sustaining success. Follow these five steps to choose the loan that best meets your business's needs.