Business Knowledge Hub

Business loans: alternatives to credit cards

We take you through some types of specialist business loans that can be better suited to the needs of your company than a typical commercial credit card.

Credit cards can provide businesses with flexibility and security when making purchases. However, in some instances specialist business loans that are designed for specific needs may represent a more suitable option. Below we take you through some of the business loan products that you can compare on Know Your Money.

How do I get a business loan?
  • Comparing: Our business loans comparison section covers the various types of credit described in this article, allowing you to filter your search by type of loan and then using your turnover, available amounts and terms, to look at the various deals available.
  • Applying: Applications can be made online or over the phone with the lender of your choice, they will then get in touch with you later in the day. Read more in our guide on how to prepare for a business loan application
  • Decision: The decision can be made in minutes and the money could be in the nominated account within an hour or two.

Start up loans

This loan type is for embryonic companies. The criteria varies, as a company may not even need a minimum turnover to qualify (in contrast to other loan types), and the terms can stretch as far as 15 years. As an example, of how you can benefit, The Start Up Loans Company - a subsidiary of the British Business Bank - is specifically designed for companies struggling to get finance from elsewhere; artists, fashion designers, IT founders and ‘mumpreneurs’ have benefitted from its lending.

Compare start up loans

Bridging loans

If you need to make a quick purchase, such as at an auction or during a sale period, then a bridging loan could fill a gap until you can obtain a more favourable arrangement such as a mortgage or more favourable funding, which can take time to set up. Bridging loans fell in the immediate period of uncertainty following Brexit, but according to Small Business they are surging this year, with a rise of nearly 3% in early 2017 compared to the same period last year.

Compare Bridging Loans

Tax loans

A business tax loan essentially helps you pay the tax that you owe. The process is simple; specialist underwriters will examine your application and determine the risk factor, before (hopefully) lending you money on fixed borrowing terms.

Compare Tax Loans

Cash advances

A merchant cash advance is a lump sum provided to companies based on projected figures, specifically card expenditure – so if you do not accept credit and debit card payments you will not be eligible.

Compare Cash Advances

Asset financing

A type of finance specifically designed for the acquisition/use of equipment such as vehicles, computers or machinery – a typical example of this is leasing. While a lease will not give you ownership, it does let you use the latest technology for a pre-determined period. A hire purchase will enable you to buy the equipment at the end of the term, and some also allow you to pay extra to include maintenance.

Compare Asset Finance

Invoice financing

Essentially, a loan presented as an advance on cash due from customers, rather than waiting for them to pay. The invoices themselves act as collateral and lenders do not need to provide the full 100% of the invoice amount owed, so this method of financing is quite popular with banks. A good credit score is usually necessary but once established there can be benefits; some lenders offer this as a free facility if you sign up to an invoice financing contract (ie letting the lender provide invoice financing for a set term).

Compare Invoice Finance

Peer-to-peer finance

A particular niche of start-up loans is the surge in peer-to-peer lending/borrowing (otherwise known as crowd-lending). A borrower can define the type of finance they need (loan, donation, etc) and set the terms, while in effect the lender is investing in a small company and can currently gain interest at a rate that is better than banks will offer – although higher interest comes with more risk. The P2P industry became regulated by the Financial Conduct Authority in 2014, and as part of the regulation the FCA changed the level of reserves needed. From early 2017 P2P platforms need to have at least £50,000 of capital as a solution to resist financial uncertainty in the future and borrowers defaulting.

Other finance

While technically fitting under the umbrella of those above, you may not be aware that internet giants such as Paypal and Amazon are lenders. Amazon, for example, lent $1bn in the last year to those who used its Marketplace platform, with interest rates of 6-17%, and this is expected to expand in the UK. Sellers in the UK have to be invited to apply, but it's possible to get a loan for hundreds of thousands of pounds.

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