First Business Loan? Here’s What You Actually Need to Know

First Business Loan? Here’s What You Actually Need to Know

Running a business means wearing about ten hats at once—so when it comes time to look at finance, it’s no wonder it feels like just another thing on the pile. Maybe you’re trying to keep the
cash flow steady, fund a new opportunity, or just buy some breathing room. But figuring out where to start with a loan? That’s a whole job in itself. Between choosing the right lender, figuring out what type of loan suits your needs, and deciding whether to go through a broker or do it yourself, it’s a lot to get your head around. This guide will walk you through the basics so you can make a confident start.

Banks vs. Alternative Lenders: what’s the difference?

One of the first decisions you’ll face is who to borrow from. Most borrowers go to either a bank or a non-bank lender (also known as an alternative lender). Both options come with pros and
cons—it just depends on what you need.
Banks generally offer lower interest rates and longer repayment terms. That means more affordable repayments month to month, which is great if you’re thinking long-term. But banks
also tend to take their time with approvals, and their criteria can be tough to meet. If your business is new, seasonal, or doesn’t have perfect financials, you might struggle to get across
the line.
Alternative lenders move faster and are more flexible. Many don’t run an upfront credit check, and they’ll look at the bigger picture, including your current revenue and industry conditions.
Some can approve your application within a few hours and get the funds into your account that same day. That said, the trade-off is higher interest rates and shorter repayment terms. It’s a
faster, more accessible option—just one that comes at a premium.

Choosing the right loan type

Not all loans work the same way. Here’s a quick snapshot of some of the more common options:

• Term Loan: You receive a lump sum upfront and repay it in regular instalments. Good
  for one-off purchases like equipment or renovations.
• Line of Credit: You’re approved for a set amount, and only draw down what you need, when you need it. Interest only applies to what you use. Great for covering fluctuating cash flow.
• Secured Loan: Backed by an asset (like property), this usually offers better rates or higher amounts. You’ll need to be comfortable putting something on the line.
• Bridging Finance: Helps you cover a short-term gap in cash flow while waiting on incoming revenue or a sale to finalise.

If you’re not sure which one fits best, this is where a broker can really help.

Should you use a broker?

Plenty of borrowers go direct to lenders, and that’s absolutely fine—especially if you’ve done your homework and feel confident comparing options. But if you’d prefer someone to guide you through it, a broker can help find a lender that matches your needs, negotiate better terms, and even handle the paperwork. They’re usually paid by the lender once a loan is approved, though some may charge you directly, so it’s worth asking up front.

Fees you’ll want to know about

The interest rate isn’t the only number that matters. There are a few other costs that can pop up:

• Establishment fees: A one-off charge for setting up the loan.
• Admin or service fees: Ongoing charges, usually monthly.
• Early repayment discounts: Some lenders reward you for paying off your loan early.

Try asking for the comparison rate—it’s a more accurate reflection of the total cost of the loan, with fees included.

One more thing: credit checks

Not all credit checks are created equal. A hard enquiry is the kind that shows up on your credit file and can affect your score—especially if you’re applying at multiple lenders in a short space
of time. Some alternative lenders use soft checks or real-time data instead, so your credit score stays untouched until later in the process.

There’s no “perfect” loan, just the one that fits what you’re trying to do. Whether you’re covering a short-term gap or investing in the next phase of your growth, it pays to understand your
options, ask questions, and read the fine print.

This article is by Bizcap