The banks and building societies tend to be the most frequently used sources of loan funding, however there are other companies which loan money to businesses at competitive rates

There are several steps you can take to get the best deal:

• Shop around for your loan. This may take time but it could save you money! Look carefully at interest rates and try to negotiate to get the best deal. Make sure you get any special terms agreed in writing.
• Always check the small print! Consider having an expert, such as a solicitor, review the loan documents.
• Make sure you have a good understanding of your own finances. This will help you choose the best option to meet your needs.
• Be prepared to switch providers. Remember - you don't have to stay with the bank that manages your personal account to be considered for a loan. It's wise to compare loans from at least four providers.

Warning: avoid unauthorised lenders, otherwise known as loan sharks. You may get a loan fast, possibly without needing a business plan or security, but there are strings attached and the loan terms can change at short notice without your agreement.

It is recommended that you always check the lenders credentials with the Financial Services Authority at http://www.fsa.gov.uk.

In order to access loans you will probably need a Business Plan, the bank will want to see how you intend to repay the loan and the interest, so this needs to be identifiable source.

Guaranteeing your loan

Securing loans on a new business may be difficult as the lender will see the risk as high.

You may need to guarantee your loan which means that the lender will know that it will get its money back should you not be able to meet the repayments

A loan guarantee may come from other people within the business, an external guarantor who does not want to make a direct investment, or the DTI’s Small Firms Loan Guarantee scheme.

You may have to pay the provider of the guarantee a fee for this service.

For Charities, it may be difficult to access loans through the usual banks, Charity Bank exists to help charities and charitable projects by providing affordable and flexible finance solely for charitable purposes. www.charitybank.org

Further information is available from Dorset Sure Start Business Support on 01929 472963 or from Business Link www.businesslink.gov.uk

Also in this Section:

Events

Loans

Bidding/Grants

Documents:

Business Plan-Contents (WORD)

Business Plan-Contents (WORKS)

Five easy ways to make money

Tips on Funding