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Can you afford to apply for a business loan?

Can you afford to apply for a business loan?

If you need to raise finance for your business, you might consider taking out a business loan. While you might be tempted to jump online to search for rates and quotes, the first thing you should do is review your business to understand whether or not it’s ready for a loan. Here are some questions to ask yourself when considering a business loan.


Can you afford to apply for a business loan?

Lenders will want to know if your business is able to make regular loan repayments, including interest and any relevant fees. You’ll need to know your business’s finances inside and out, with a particular emphasis on cash flow. Calculate your company’s outgoing expenses each month, including supplier payments and operating expenses; is there room for loan repayments after these expenses are deducted from your earnings? Don’t forget to factor loan interest, fees, and any early repayment penalties into your analysis. (LendingCrowd loans are free of early repayment fees, giving you more flexibility and control over your loan.)

While long-term loans can be more affordable on a monthly basis, remember that you may pay more interest over time than if you took a shorter loan. Depending on your circumstances, you may be able to get a better rate by refinancing and consolidating your debt.


How much money do you need?

How much finance you need depends on what you will use the loan for, but when applying for a loan, make sure you’re not asking for too much or too little. If you ask for more than you need, you could pay more on monthly repayments than you need to. If you ask for less than you need, you may need to apply for a second loan. Make sure your cash flow is sufficient enough to cover the cost of the repayments without needing to dip into emergency funds.


How is your business performing?

Is your sector experiencing change? If you anticipate slow sales for an extended period of time, or your company’s finances aren’t stable, you may find it difficult to make your repayments. Consider whether you would still be able to make your monthly repayments if sales were to dip suddenly. Alternatively, if you plan on making large purchases in the future, bear in mind how these new costs will impact your ability to repay your loan.


Are you willing and able to cover repayments personally?

Lenders typically review more than just the company when assessing a loan, and may ask questions about company owners and directors. Be prepared to answer questions about your own finances, including your own credit score, and your ability to repay the loan if the business is unable. Are you prepared to offer a personal guarantee that you’ll pay the loan in the event your company cannot?


Research your options

Once you’ve assessed your business, shop around for the best rate. There are many different options for business loans, including your local high street bank and peer-to-peer (P2P) lending. LendingCrowd offers P2P loans to small and medium-sized businesses across the UK. Borrowing with LendingCrowd is quick and easy, and our expert Credit Team will support you throughout the duration of your loan, from your application to your final repayment.

If you have any questions, don’t hesitate to call our Credit Team directly at 0131 564 1610 or send an email to We’re here to help!


Can you afford to apply for a business loan?


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Lending Crowd

Lending Crowd

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LendingCrowd is working with the British Business Bank to help deliver CBILS loans to SMEs affected by the Covid-19 pandemic. Find out more: