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Looking for a Loan for Your Start-Up? 5 Tips to Choose the Right One for You


Nov 17, 2020

Starting a business is one of the most fulfilling achievements you’ll ever experience. Every bit you put together from customer segmentation, to value proposition, communication and distribution channels, revenue streams and key resources, matters. Having said that, we all know that you may have the best business model and the professional chops, but without the right form of financing, nothing will get off the launchpad.

Personal savings and personal credit cards are often lined up as some of the top funding sources of business startups. However, these may not be enough to finance your startup. You may have to seek alternative funding options such as loans for pensioners if you have enrolled in a pension scheme or loans for bad credit no guarantor if you want quick approvals.

As you think about getting the right form of funding for your startup, here are some tips that can go a long way into guiding you on the best options available.

1.      Determine the Startup Costs to be Covered

When setting up your business, there are lots of expenses that you’ll have to foot including equipment acquisition, inventory purchases, office supplies, permits and licenses. Other than these one-off costs, you’ll also have other running expenses such as rent, taxes, payroll, and mortgage payments.

Once you get a handle on what you need for working capital and the one-off costs, you can then begin to look for the options available. If the amount you need is huge for a short-term loan, you can opt for a long-term credit facility.

2.      Check Your Credit Score

Once you’ve established the amount that you need based on the startup costs, turn to your credit profile and see what your score is. Expectedly, your startup doesn’t have an established business credit history at this point. This means lenders will use your personal credit score for loan assessment and approvals.

If you have a stellar credit score, you’ll have a lot of options when it comes to getting the right type of business credit. However, this doesn’t mean that you cannot get quality funding with a poor credit score. There are lenders out in the market ready to advance loans for bad credit no guarantor at incredibly attractive terms.

Here is an overview of the credit score categories you may find yourself in depending on the credit rating agency (CRA) you choose.

  • Experian: This CRA has scores ranging from 0-999. Scores of between 721-880 are categorised as fair, 881-960 as good, and 961-999 as excellent.
  • Equifax: Here, scoring ranges from 0-700. If your score falls between 380-419, it is considered fair. Scores of between 420-465 are rated as good while 466-700 is rated excellent.
  • TransUnion: If you run your credit check on TransUnion your score will fall anywhere between 0-710. A score of 566-603 is categorised as fair, 604-627 as good and 628-710 as excellent.

Most traditional lenders will approve loans if your rating is 680 and above. That being said, those with ratings below 680 can still get financing from non-bank lenders such as institutions giving loans for pensioners.

Whatever the case, knowing your credit score and working towards improving it can set you up for some great loan products.

3.      Review Your Revenue and Cashflow Projections

As a startup, you may not have months of history in actual revenue. In this case, you have to do projections based on your business plan and outlook. The projections must be realistic and based on solid assumptions.

If you have been in business for a few months, use the revenue realised to build your case including making projections for the next 1-3 years.

Not every lender of loans for bad credit no guarantor digs into your actual and/or projected cash flow and revenue figures. However, it is important to have a clear idea of the cash you expect to come in and go out of your business and the timing.

Ultimately, it is cash flows that will pay up the loan so the stronger your projections the better your chances of getting approved for the right type of loan.

4.      Choose the Right Form of Financing

Financing comes in different forms and knowing what suits your business best is critical. Here are the different types of loan options to give you an idea of what’s available out there.

  • Equipment financing: This is a type of loan advanced to help you acquire equipment for your startup. Typically, the loan size covers 100% of the cost of the equipment and the repayment period can be stretched over the useful life of the equipment.
  • Business line of credit: This form of financing is advanced on a drawdown basis and can be used to pay for a variety of startup expenses. Expect loan amounts of between £10,000- 1m with repayment periods of up to 5 years.
  • Business credit card: Based on your creditworthiness, you can consider this loan to help you pay for low-cost expenses.

Your needs and business structure will determine what is suitable for you. If you don’t have lots of equipment to purchase, getting an equipment-financing loan may not be a great idea.

5.      Get Quotes from Different Lenders

As expected, lenders price structure their loans differently. Getting several quotes and comparing them one against the other can be helpful. When looking at the quotes, pay close attention to the loan structure for the following features:

Repayment terms: An amortized loan will require you to repay in equal instalment throughout the loan tenor. You could also look at a balloon loan where you have the provision to make a large payment at the end of the loan’s tenor when your business has picked up.

Depending on the lender, loans for bad credit no guarantor can be structured as bullet loans where the initial instalments comprise interest payments with principal repayments made at the end as one large amount.

Tenor: If your needs are immediate and short-term such as cash flow bridging, short term loans like development loans, bridging loans, etc. can be appropriate for you. Purchase of long-lived assets can best be financed using medium and long-term loans.

Risk: Look at how risk has been priced into the loan. The annual percentage rate (APR) the measure of risk lenders use. Compare across the board how much the different lenders charge as APR. Normally APR comprises the interest rate and other charges. Ideally, you should go for single-digit APRs with low to zero origination costs.


Locking in the right form of funding for your startup is very crucial for business stability and liquidity. It all begins with an objective assessment of how much you need to cover your startup costs and your credit score. Most providers of loans for bad credit no guarantor usually run a ‘soft search’ to enable them to give you a quote and then a’ hard search’ to assess your ability to repay.

Having solid revenue and cash flow projections will give you a better chance of getting approved with the best terms even if you are applying for loans for pensioners. Always look at the different forms of financing available and assess how best they suit your needs before digging deep into the loan structure as reflected in the different quotes you receive.

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