Commercial Loans
Commercial loans are available at competitive interest rates and
repayment terms from our lending market leaders. These can be
used to start or expand and develop your business or for the
purchasing of equipment. Commercial loans could be the most
flexible solution to meet your financial needs but it's also
important to consider the effect of loan repayments on your cash
flow and business assets.
When looking at commercial loans you will need to assess your
requirements for repayment terms and compare interest rates,
known as the Annual Percentage Rate or APR, of different lenders
in order to decide which loan is best for you. The repayment
term can be anything between one and fifteen years on average
and you have two choices with regard to interest rates: fixed
interest rates and variable interest rates.
Fixed Rate: The interest rate is set at the beginning of the
term of the loan, the percentage given to you being determined
by your circumstances, the amount of the loan, the term and your
assessed ability to repay the loan by the due date. Your monthly
repayment amount remains constant, regardless of changes in the
bank base rate which is an advantage if the rate increases but a
disadvantage if it drops.
Variable Rate: The interest rate you pay is linked to
fluctuations in the bank base rate and can therefore increase or
decrease depending on what is happening in the open market. You
will consistently pay the current market rate plus an agreed
premium but because the base rate can change, your monthly
repayments could go up or down. This is an advantage if interest
rates fall but you may end up paying a lot more if rates rise.
There are a number of reasons why commercial loans can be a
beneficial way of raising the money you need. The first is cash
flow. Because your loan repayments are agreed and set for the
term of the loan your cash management can be more predictable
from month to month. Secondly, you have a large degree of
flexibility on how you use the loan, including paying off other
higher interest loans. Commercial loans also enable you retain
ownership in your company by making it unnecessary for you to
raise funds by selling an interest in your company to an outside
investor. Interest payments on commercial loans are also tax
deductible and are made with pre-tax money. A further advantage
is that if you back your loan using capital equipment then you
remain the legal owner of the equipment. You must be aware
however that if you do not pay back the loan and default on
repayments then the lender is able to foreclose on any assets
backing the loan and to sell them to pay back the money owing.
Comparing the APRs of commercial loans is a good indication of
how competitive loans are but it is also important to pay
attention to the small print on the loan agreement. If you think
you may be in a position to pay back the loan before the due
date then you'll be wise to check the early redemption policy of
the lender. Some lending companies charge up to two months
interest if you settle the loan within 3 to 5 years and before
the due date, which can increase the total cost of the loan. It
may be cheaper to take a loan with a slightly higher APR but
with no redemption penalty.