SME business loan

A SME business loan is that it is complicated and - more often than not - a small business does not have access to working capital fast enough. 

There are various good ways to have access to small businesses loans in a non-time consuming and easier way and in fact you can have a loan of over 100k in a few minutes if you qualify (with some of these companies).

There are 4 basic ways that you can get money for a business, ranging from affordable and easy to difficult and rather expensive. 

  • A normal bank: you are likely to get really good interest rates, excellent service and relatively good accessibility, but the time it takes for funds to get to you could surprise you. Also, banks can have obscure terms and fees.  
  • Online lenders: here you can get the full scpectrum of quality ranging from horrid to excellent. Do your research.
  • Crowdfuding: it will take magic to raise money through a crowdfunding campaign and as such it requires plenty of work. The advantage of course is that you have much more autonomy and the marketing is sort of implied. It will depend on the kind of business you are running.
  • Initial Coin Offerings (ICO): If you have the right connections and the expertise you should be able to investigate the amazing possibilities available in the blockchain space. 

Generally speaking there will be a series of steps you will have to follow that starts with figuring out if you and your business have the qualifications, learning about the propositions in detail, applying and finally getting your hands on the money. 

  • Qualifications: some SME business loan companies will focus exclusively on your credit score to qualify you while others will take into consideration your business performance in general which can greatly improve your chances of getting a good deal.
  • Minimum requirements: as a rule of thumb a fresh startup will not be able to get a loan. If you haven't build credit or have no "skin in the game" so to speak, it will be hard to get a good deal or a loan at all. The idea is that you must provide proof that you are making money and with that, you can get a loan. 
  • Taking and managing funds: it should be easy to manage funds, meaning that a company giving business loans to SMEs should make funds easily available and usable. Additionally, a business should also give you expert advice for free. 

What you are looking for are loans that at least offer you the following:

  • Funds flexibility: you should be able to use your money as you please, meaning you can spend it as you see fit and withdraw as you wish as well. Some loans have limits on the number of daily withdrawals. 
  • Transparency: one of the key elements to feel safe while having a loan company as a business partner is to understand the loan terms and conditions. You must go for a company that have simple repayment schedules and easy or non-existent penalties.
  • Simplicity: The application process should be easy and perhaps even automated in such a way that the evaluation of your credit is seamless so you do not have to put together a complicated financial dossier.  
  • Convenience: withdrawal of funds should be as easy as using a credit card or going to a web page and transferring funds to your account. This is especially useful if you need to work away from the office.  
  • Trust: it is easy to verify a business' authenticity. There are business credit ratings available and customer testimonials out there to balance out multiple perspectives and see if the business lending you money is consistently delivering on their promises.
  • Awesome service: this is obvious but it does not hurt to mention here. Someone that will be making a substantial amount of money lending money to you should know the ropes and fight for your business.

So, you want an SME Business Loan? It's going to be a pig of a job to get an SME Business Loan. Just saying here, people: it may not be so easy despite what all the ads say. Including the ad right below this phrase! First, you will need to understand what an SME business loan is, then see what are the steps required to get your hands on one and finally, what should you expect if things do not go your way. In other words, should you get approved by a loan you should also be aware of the consequences in case you fail to pay it off.

What is an SME Business Loan

An SME Business Loan, or Small & Medium Enterprise Business Loan is exactly what the name says: a loan especially designed for small businesses and as such you will be required to prove you are a sound business in order to convince a partner that you are the sound individual behind the business, both of you worthy of their money.

Sources of a SME Business Loan

Generally speaking, all the loan money will come from banks or especialized financial institutions that cater to SMEs. Of course you can take money from that cousin that won the lottery or sadly construct a fable of easy riches to your retired parent and defraud them out of their golden years, but that is not nice. So, we reckon you do it right and take out a loan after considering the reality of the situation and understanding the consequences and responsibilities of operating a business under the pressure of also having to pay off debt.

Why get a business loan

First things first, thing about the business. Really. Do not fall for scams, pyramid schemes, invest on stuff you do not have any experience with, or even worse, put money on something after you read a book. Start slowly. So here are some pointers:

  • Get a loan to accelerate growth of a real business that is clearly going to go black.
  • Get a loan to work on a killer idea that has been tested properly, out in the public, perhaps using techniques such as the 80/20 rule or proper field testing according to "lean startup" theories.
  • Get a loan if you are part of a team that has proven it can work together and by that I mean beyond social scenarios. It has to be real.

Why not to get a business loan

Just as there are legitimate reasons to get a business loan such as those listed above, there are reasons not to take out a business loan and it is important to know these.

  • Do not get a business loan to keep an image of success.
  • Do not get a business loan to pay off another business loan.
  • Do not get a business loan to pay off personal debt.
  • DO not get a business loan to grow a business you have more faith in than knowledge of.

Types of SME Business Loans

There are many types of business loans out there, from factoring invoices to cover salaries (which is a type of loan really) to the real loans provided by banks. Here is a small list of types of loans you can take out:

  • SME loans with a bank, also called commercial loans
  • SME loans with a lending institution
  • Credit Cards
  • Factoring
  • Line-of-credit loans
  • Installment loans
  • Balloon loans
  • Interim loans
  • Secured loans
  • Unsecured loans
  • Letter of Credit
  • Term loans
  • Secondary mortgages
  • Guaranteed loans
  • Inventory loans
  • Accounts receivable loans

How to get an SME Business Loan

The best way to get an SME business loan is to follow through with a plan you put together and determine the closest thing you can call the reality of the situation. As such what is most important for you to do is to create a situation where it proves that you are credible. Remember, you should not pretend you are credible because that will only break you. You need to own up to the reality of your business and either invest on something good or cut down your losses.

  • Plot out your business financial numbers and future expectations
  • Put together a small business plan that with a 10 step process that validates your need for a loan
  • Create a list of institutions you will contact
  • Contact them from the most economical down the most expensive

What to do with an SME Business Loan

So you got a business loan because you went to a financial institution and convinced them of the inevitable short term success of your business and that its demise would put you and your family on the streets. Now what? you must be asking yourself this question as it often pops in the head of those that just themselves a big chunk of money from a bank. It is simple right? Just do what you set out to do and things will be alright. Reality is always different: a partner blows up on a meeting, or even worse, has a hidden problem with blow. Who knows. The fact is what to do with the business loan is simple:

  • Man up. Do the right thing and follow the plan
  • Do not pivot. Nudge. Do daily evaluations
  • Use the extra financial peace of mind to plot out daily objectives. Perhaps have a dashboard with important metrics.

What not to do with a SME Business Loan

The question of course is simple and you should know the answer already if  you read this far: do not break off from your plan because the plan is the best way to measure your success against. It is a way for you to nudge assess, react and nudge towards a successful implementation of the newfound cash reserves.

What to do if I fail to pay my SME Business Loan

First of, no panicking and no getting another loan. If you following the instructions you set for yourself and your company, it is obviously clear that if no external forces were at play preventing your success, it is best to look within and find peace through the process of finding fault in your actions. Trust me on this. If you simply stick to this true, you will become a better businessperson. Again, if it fails, look for what you could have done differently and:

  • Contact lender, lawyer, accountant
  • Arrange most efficient solution.

  • Barclays
  • Techstars
  • Nestholma
  • Nordea
  • Tekes
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