Finance Blog | Commercial Lending, Essex, London | first 4 Commercial

How to get the best commercial loan

If you’re looking for a commercial loan, chances are you’ve just started looking into business loans that you’re eligible for. When searching for a commercial loan, you’ll find that the results you get back from the internet are extensive, to say the least. Below, you’ll find a step-by-step guide to help you figure out how to get the best commercial loan.

1. Think about why you need a commercial loan

Commercial loans can be used for a range of business needs but are mostly used to fund business ventures or cover business costs that occur in the operation of your business. Determining why you need the commercial loan will help you find the best one for you.

2. Look at the loans available

Like all loans, commercial loans come in all shapes and sizes. Research into the ones available; how much you can borrow, interest rates, and if there are any limitations on what they can be used for.

3. Find out what you can qualify for

Depending on various factors, you may not be eligible for all available loans. Read up on those that have peaked your interest and check the criteria with the financial lender.

4. Gather your information

Once you’ve enquired and found a loan you’re eligible for, have a look at the loan application and start putting together all of the required information you need to supply.

5. Apply

Fill in your application, check it for mistakes, and click submit. Finally, wait for a response from the lender.


Bridging loans and moving home

There are two main bridging loan types: the closed bridging loan, and the open bridging loan. Closed bridging loans are typically used by individuals buying homes that have already exchanged on the sale of their existing property. Open bridging loans, however, are usually taken out by buyers who have found their ideal property but might not want to put their current home on the market yet.

If you have the option to use a bridging loan, you may be able to tide yourself over in the short term of any unforeseen expenses that could come from the purchase process. For example, for homeowners whose buyer is delaying the purchase, or if it seems like a deal might fall through. For buyers, if there’s an issue with the sale, you have the option of a second mortgage or a bridging loan.

Unless you are certain when a home sale will be confirmed, you should avoid taking on debt like a second mortgage. This is where a bridging loan comes in. The financial provider will want to see the details of the mortgage you’ve taken out for the new property you’re purchasing, as well as proof that your current home is on the market at present. They’ll also want to know how you expect to meet the repayments, and what your exit strategy is if the sale of your home falls through.

Bear in mind that bridging loans have higher interest rates than a lot of other loan types. Consider talking to the other party and your solicitor about your concerns before you take out a loan.


Repaying a bridging loan

Bridging loans usually have higher interest rates than most other loans available from financial lenders, so you should be cautious about taking one out. However, if a bridging loan is definitely the way you need to go, you should have a strategy in place for when you need to start making your repayments.

Before your loan application is approved, you’ll need to prove that you’ll be able to meet the repayments with the interest attached to them. Unless you have agreed otherwise with financial provider, bridging loans typically last no more than 18 months, though some providers will only allow up to 12 months.

Some loans are structured so that the interest is paid each month, whereas others include the interest as part of the full loan repayment. Interest rates typically start from 1.5% a month, or 18% APR. Though some providers do offer rates as low as 1% per month.

Whether you have a closed bridging loan or an open bridging loan, there is nothing stopping you from repaying the loan earlier than the original repayment date. A closed bridging loan requires the borrower to show that they can raise the funds to repay the loan by the repayment date, whereas, an open bridging loan requires the borrower to pay their loan back on or before the repayment date. For an open bridging loan, it’s suggested that the borrower repays as quickly as possible to avoid some of the interest that is added on as time goes on.


What to look for in a financial lender

Taking out a loan is a particular kind of stressful, but with this short guide, you should be well on your way to finding a great financial lender for your loan needs.

Look for a financial lender that can offer you options. Not just options for repaying your loan, but also different loan types and various interest rates. When you’re deciding on a loan, you should be able to thoroughly look at all of this information to make an informed choice.

Ask for credentials, associations, and registration numbers. Official financial lenders have to be registered with the Financial Conduct Authority and should have a visible FCA number on their website. For example, first4commercial are also full members of the National Association of Commercial Finance Brokers and are associates with the Association of Bridging Professionals. Our FCA number can be found at the bottom of our website.

Watch out for hidden charges. Loan companies should be upfront about everything that you loan package includes, especially if there are any additional charges to their service. Some lenders have been known to include faster payment charges that they haven’t disclosed to the individual requesting the loan.

Finally, check the financial lender’s reviews. Past customers will have a lot to say about a service, whether it was good or bad. Checking reviews can save you a huge headache in the future, and their great for first-hand experiences from individuals who have actually dealt with the financial lender previously.


Things to consider when looking for a loan

Searching the financial market for the best deal on a loan can take a while, but it’s definitely worth it. When it comes to borrowing from a financial provider, things are never entirely straightforward, so it’s best to shop around for a good deal from a company or lender you can trust.

The first choice you’ll need to make when looking for a loan is “secured” or “unsecured”. A secured loan is only available to homeowners, because the home is often put up against the loan for security. An unsecured loan has no collateral and are widely available. When considering a secured loan, ensure that you have the means to repay the loan, otherwise you could lose your home in the process.

Unsecured loans, like personal loans, are very popular. The maximum you can usually borrow is £25,000, though it’s better to only borrow as much as you need. Secured loans, like bridging loans, have borrowing options up to £100,000 depending on the financial provider.

Here are some things to consider when looking for a loan:

  • Do you own a property? If yes, you may be looking at borrowing using a secure loan.
  • How much do you want to borrow? Smaller amounts can be borrowed using personal loans, but for large loans, you should look at bridging finance.
  • Can you meet the repayments? You could ruin your credit rating with unpaid loan repayments and individuals with low incomes are likely to be rejected.

Take all of this into consideration when looking for a loan.


How to get a personal loan without damaging your credit rating

An estimated 1 in 10 people in the UK have a personal loan. Personal loans, or unsecured loans as they are also known by, are loans that are not secured against an asset (such as your home). They’re usually small loans taken out to meet some personal requirement or to pay for an unexpected financial event. Examples are buying a new car, paying off a holiday, or an unexpected washing machine breakdown.

When the system for personal loans is misused, it can often be damaging for the person who took out the loan. Responsible loan providers should only be willing to lend out an amount of money to an individual if they can pay it back in the allotted time.

Your credit rating is one of the first things that is checked when your loan application is being considered. If you have a bad credit rating and take out a loan you cannot afford to repay, but is approved, you are going to leave a huge dent in your rating for future years to come.

When considering a personal loan, check your credit rating first. Then, shop around for the best interest rates and lenders that offer a good range of options. You’ll want to find a low interest rate, but don’t borrow more than you can afford to repay; definitely don’t max out the loan amount that you can borrow. This is how you avoid ruining your credit rating with a personal loan.


Fixing a denied personal loan application

When a financial provider denies your personal loan application, you start wondering what to do next, and why it was denied at all. The first step to take is to enquire with the lender for a reason why the loan was denied. They aren’t obliged to give you an answer, but most financial lenders will be happy to point out where your application went wrong.

In some cases, it’s simple. Your details are wrong, perhaps a misspelt name or address. A quick fix. In other cases, it can be slightly more serious. Two of the most common reasons that loan applications are denied are that the person applying has bad credit, or that they don’t have enough of an income. In these cases, financial providers are wary of lending because they are concerned the loan might not be repaid.

Applications can be resubmitted, though. If there are any errors in your credit report, you have the right to have those mistakes removed and to resubmit your application. You can use rapid rescoring to have your credit report fixed and your rating adjusted.

Other loans can also be an issue. If you have other loans, try paying those off first before you take out another loan. It’s bad practice to have more than one loan at any time, because you could be getting yourself into a cycle of debt. Also, never use one loan to pay off another.

Finally, where you can, use collateral on your loan. Offer something to of value to secure the loan with a promise of repayment.


How to avoid your Personal Loan application being rejected

Ultimately, there’s no way of knowing whether or not your personal loan application will be accepted until your lender tells you, but there are some simple fixes for your application that could prevent it from being rejected.

First of all, if you have a history of bad credit, you’re more likely to be rejected for a personal loan. However, while bad credit is usually pooled together as a group, there are various levels, and several years of your history will be viewable. Similarly, if you can’t prove that you have sufficient income, a lender will not approve your application, because they’ll be able to calculate that you can’t afford the repayments.

Having an unstable employment history can also have an affect on your application. Like a job interview, you need to be able to properly explain any gaps in your employment history, or fill them in, if possible. You need to show that you have a stable job, and therefore, stable income. You should also ensure that all of your details on your application are correct; if something is deemed incorrect, your application won’t be looked at further.

Your application also won’t be considered if you’re currently holding too many other loans, or if the purpose of your loan is doubted. You should doublecheck that it is a personal loan that would be best for the purposes you need financial aid, rather than any of the other types of loans that are available on the financial market from various lenders.


The advantages of Bridging Finance

There are several advantages to bridging finance that you wouldn’t get with other loan types. Bridging finance, or bridging loans, are perfect if you require a short-term loan to tide you over in unexpected circumstances, they’re quickly arranged, and the lending criteria is very flexible. All types of property can be used as security in bridging finance applications, including property that is in poor repair, and non-standard property construction. If one of your properties doesn’t cover the security deposit, you can use multiple properties, instead.

When applying for bridging finance, you should be aware that you’ll be paying a higher rate of interest than you would for other loans. This is because bridging finance can be seen as a riskier kind of financing solutions to a lender, and there aren’t many lenders in the financial market willing to supply the finances for a bridging loan.

Bridging finance can be used for a range of needs, including home renovation, refurbishment, and personal needs. Like its namesake, bridging finance is supposed to be used as a bridge between points of financial security. Unexpected costs, like sudden damage to your property, or appliance breakdowns, would be the perfect time to take out a bridging loan.

Repayment for bridging finance is flexible, as long as you repay the full loan, plus interest, within the set amount of months (usually 12 months), you can pay in instalments, or back in back in full anytime within the designated time period given by your bridging loan provider.


Tips and Tricks for taking out a Loan

Borrowing from a loan provider can be a little distressing, but with this quick guide of handy tips and tricks, hopefully you’ll feel more at ease when you start your first application.

Make sure you spend time shopping around for the best loan for you. Not just loan price or provider, but also interest rates, borrowing periods, and applicant requirements. You don’t want to waste your time applying for a loan that you’re not eligible for, and you should always read up on the various types of loans that are available on the financial market, to ensure that you’re choosing the right one.

Check the repayment amount, and make sure that you’ll be financially stable enough to repay the loan when the time comes. Never borrow more than you can afford. Keep a record of your expenditures per month and add in the costs of the loan repayment. This will help you keep track of your monthly outgoings, and keep you from accidently spending more than you have while you’re paying back your loan.

Try not to use a new loan to pay off an existing debt. This is an endless cycle, and if you’re not in a stable financial situation, then you’ll end up trapping yourself with a mass of loans and debts that you’ll struggle to pay back. In addition, don’t borrow from loan sharks; always stick with a reputable financial provider, like a bank, or a well-known loan website with good and visible customer reviews.

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