People tend to assume that a small business loan will only be used to help a business in difficult financial situations.
While they certainly can be used in these times (such as during the pandemic), business loans have many other uses and this is why they are a popular option for businesses in all industries. So, just how popular are small business loans?
Loans for Startups
Almost a third (27%) of SMEs taking part in the British Bank survey 2018 reported being financed by a loan, which shows that this is a popular form of funding for getting a business up and running. A small business loan can be preferable over an investor as you do not have to give up any kind of control and it can be a fast way to access the capital that is needed to get up and running. At the time, 73% of smaller businesses decided to forgo growth instead of borrow money and the uncertainty over Brexit could have played a role here.
The Pandemic
Of course, the pandemic came after this survey and this has greatly changed the landscape. The pandemic has created hardships for a high percentage of businesses, especially smaller companies that might have struggled to survive. Small business loans have been a life raft during the pandemic and helped many smaller companies to manage during unprecedented times with many having to close completely for large parts of the year and still cover costs.
The Government’s Coronavirus Business Interruption Loan Scheme (CBILS) allows eligible SMEs to borrow up to £5 million with lenders also stepping up approval rates to help businesses to get access to the money that they need during these challenging times.
Loans for Growth
Businesses can turn to a small business loan to cover their startup and ongoing costs or to manage in difficult times like the pandemic, but another popular use of a small business loan is growth. When a small business is in a healthy position, they will look to grow whether this is expanding, investing in new equipment or bolstering their workforce. Capital is needed in situations like this and a small business loan is often the quickest, easiest and most effective way to get the money.
Different Options
There are also many different types of business loan available, which means that a business can find the best option for their current situation whether they are starting up, looking to weather the storm during a challenging period or for growth. Of course, the key is to make sure that you can afford the repayments so it is a decision that should always be made carefully.
Small business loans are a hugely popular option for SMEs because they can be used in so many ways and they are a quick and easy way to get your hands on a large amount of money without negatively affecting the business.
