Why are businesses struggling to get Coronavirus Business Interruption Loans Scheme? Our research at Cloud Accounting LLP has found the potential for some businesses to be left with a choice of only three lenders under CBILS. For example:There are 32 active lenders, of which 12 restrict CBILS to existing customers only. If the business is […]
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What to check before applying for a loan
Before you apply for a loan, there are some things you need to consider.
1. Is a personal loan the right option?
A business loan isn’t the only choice available. Are you able to delay the spending and take time to save the money? Even if you’re not able to save the whole amount, saving a portion of it will put you in a better position.
If the amount you need is relatively small and you’re confident you can pay it back quickly, a credit card with an interest-free period on purchases is another option that could suit.
2. What will the repayments be?
Use our calculator to look at how much your repayments could be and how that may impact your budget.
If you’re looking at a personal loan with a variable interest rate keep in mind that the rate of interest could go up or down. If it was to go up, could you still afford the repayments? If not, you may want to consider reducing the loan amount or extending the loan term.
3. Is the loan secured or unsecured?
A secured loan is one where you provide an asset (such as a car or property) as security for a reduced interest rate. Keep in mind that the asset is at risk if you can’t pay the loan back. With an unsecured loan, you don’t provide security, but the amount you can borrow is typically smaller. HSBC offers both secured loans – in the form of mortgages - and unsecured loans.
4. What's the term of the loan?
This impacts the amount of interest you’ll pay, and ultimately the overall cost of the loan. The longer the loan term is the less your regular repayments will be. But you'll likely end up paying more interest over the course of the loan. Again you can use our calculator to look at how changing the loan term may change the overall amount of interest you pay.
5. What exactly are the fees and charges?
Loans are advertised with a ‘representative APR’ which is an annual percentage rate. This allows you to quickly compare the available offers from different banks. However, the final interest rate you're offered will be determined by:
- your financial history
- your personal circumstances
- how much you want to borrow
- how long you want to borrow for
Lookout for any additional charges associated with taking out the loan. For example, some lenders may charge an arrangement fee. These, together with the interest rate, can make a big difference to the overall cost of the loan.
6. Is there a penalty for early repayment?
Some lenders will charge you a fee for paying off your personal loan early. If you feel this is something you may want to do, then avoiding this fee could be a key requirement.
7. How's your credit report looking?
Your past borrowing and financial history can determine whether you are approved for a loan, as well as the amount of money and interest rate you’re offered. Credit reports detailing your financial history are held by the credit agencies You can see the credit scores and credit ratings that thee agencies have for you for free or for a small fee.
It can be a good idea to check, if only to make sure there are no mistakes on your file. Keep in mind that your credit report isn’t the only thing that a bank will look at when making a decision. So it won’t tell you whether or not you will be approved.
8. Are you ready to apply for a loan?
Getting a quote for a loan won’t usually appear on your credit report, but making an application often will. Too many applications can have a negative impact on your credit report, so it’s wise to be sure that a particular loan is right for you before you apply.
SEIS is a Government scheme aimed at incentivising investment into so-called “seed-stage” and start up companies. This note covers the basics of how the scheme works, what tax relief is available and who is eligible for the scheme. How does the scheme work? SEIS operates in a similar manner to the Enterprise Investment Scheme, providing […]
This short video explains nicely how you, as an investor in a SEIS registered small business, can potentially save 72.5% on your tax bill in the 45% tax band and invest anywhere up to £100k in any given year. Talk to Cloud Accounting (NI) if you are a startup wanting to register as an SEIS or […]