Business Loan Rates

Most businesses will need an injection of cash at some stage, either during their start up or to expand later or keep a positive cash flow during a lean period. And for most people they turn to the banks and apply for a loan or overdraft and this is still a good course of action even if money supply is tight and each bank is perhaps more prone to lend less.

Banks have stringent rules for lending money to businesses and it is important that you understand business loan rates and what they are looking for before you approach them for money.

It's harder to get a loan to start a business than it is to get one for buying a car or to make home improvements.

The amounts will tend to be larger and the loan will be taken over a longer period of time.

Since the credit crunch getting a loan has become much harder, as banks have become more sensitive to bad debt.

The CAMPARI method - how banks check you out

Most major banks in the UK use a checklist of requirements, which you have to meet to become eligible for a loan. This is known as CAMPARI. Understanding what this list is will give you a head start when preparing your interview and will make sure that you do not turn up at your loan interview unprepared.

You have to do as much as possible to reduce or remove the risk to the bank. Banks do need to lend money to survive but they have become more cautious and now check their applicants much more thoroughly than they may have done in the past, when money was washing around the system.

Banks may now demand that you agree to a set of conditions before they will lend money. These 'covenants' are basic commonsense but if you break them the bank are entitled to demand an instant repayment of the loan.

Shop around for a deal

Don't automatically go to you current bank for the loan. Although you may have a personal record with them it will not necessarily help you with a business loan. Some banks may be running promotional deals, with reduced rates of interest and add-on sweeteners for start-ups or business loans. If you have done your homework and have an impressive business plan then you will be in a position to choose between loan offers.