In a 2019 report by the British Business Bank, it was estimated that 44% of UK small and medium-sized enterprises (SMEs) sought some form of external finance. While businesses need capital for different reasons, it’s undeniable that credit plays a crucial role in business growth and stability. In this article, we’ll explore how credit works, its benefits, pitfalls to avoid, and how businesses can use credit to their advantage.

The Power of Credit: Fueling Business Growth

Credit is essentially borrowed money that you can use to invest in your business, with the understanding that it will be paid back with interest over time. This borrowed money can be used to expand operations, purchase inventory, hire personnel, and more. Moreover, business loans can act as a buffer during lean times, ensuring that your business remains operational despite financial hiccups.

The Crucial Question: Why Borrow Money for My Business?

The British Business Bank reports that the demand for external finance is highest among businesses with growth ambitions. This is because credit allows companies to leverage current success for future gains, fuelling expansion and innovation.

Navigating Bad Credit: Is it Possible to Secure a Business Loan?

A common concern for many business owners is the impact of bad credit on their ability to secure loans. Bad credit refers to a poor history of managing debts, which lenders might view as a red flag. However, it’s worth noting that it’s still possible to secure bad credit business loans.

Assessing the Costs of Bad Credit Business Loans

While the costs of bad credit business loans can be higher than traditional loans, they offer the necessary funding to businesses that would otherwise struggle to access finance. In fact, a 2019 report found that 26% of SMEs who had previously been rejected for finance applied for and successfully secured a bad credit business loan.

The Journey to Credit: What Do You Need to Prepare?

Before applying for a loan, it’s important to assess your business’ current financial standing. You must be able to answer crucial questions such as:

Understanding the Costs of Credit

This could range from interest rates to origination fees and more. It’s crucial to have a full understanding of these costs before you proceed with a loan application.

Gauging Your Repayment Capability: Do You Have Enough Cash?

Assess whether your current cash flow can sustain loan repayments. Failure to do so could potentially lead to more financial complications.

Securing Your Loan: What Security is Needed?

The type of security required depends on the loan type. Some loans may require collateral, like property or inventory, while others might require a personal guarantee.

Exploring the Duration: How Long Does It Take to Secure Credit?

The time to secure credit varies depending on the lender, loan type, and the business’s financial status. Some loans can be approved in as little as 24 hours, while others may take several weeks.

Choosing the Right Funding Solution for Your Business

Every business has unique needs, so it’s important to find a loan that fits your specific circumstances. Fortunately, there are numerous types of business loans and financing solutions available, from small business loans to alternative finance, working capital funding, and refurbishment/expansion funding.

Conclusion

Borrowing money for your business can provide the resources necessary for growth, development, and stability. Whether it’s a small business loan or bad credit business loan, credit can be an effective tool to fuel your business ambitions. While there are costs associated with borrowing, the benefits often outweigh them when loans are managed responsibly. The key lies in understanding your business needs and credit options and making informed decisions.

JPM Capital: JPM Capital offers a range of funding solutions for businesses of all types and sizes.