A stalwart of the UK's high street, Lloyds Bank, remains a frequent choice among business owners looking for financing. Whether you're seeking out a small business loan or large commercial finance, the bank provides a choice of funding. Below is a bit more information like what fees you'd expect to pay and lending terms.
Lloyds Bank small business loans
SMEs can apply for a range of Lloyds Bank business loans up to £500,000. At the lower end is the Base Rate Loan, which lets businesses repay a loan of at least £1,000 over a term of up to 25 years. The loan’s interest rate is linked to the Bank of England base rate so be prepared for your repayments to change if the base rate changes.
If you want to know in advance what you’ll be repaying every month, Lloyds also has a fixed rate loan up to £50,000. It’s repaid over a term of up to 10 years, and can come as a secured or unsecured loan. There are no early repayment fees for these loans.
Borrowing for bigger business
Next up is the Commercial Fixed Rate Loan between £50,001 and £500,000 and paid back over 1 to 25 years. The repayments are fixed each month so you can plan ahead with your finances, but if you want to repay early you could be charged.
Lloyds offers a large secured loan – the SME Fixed Rate Loan – starting at £50,0001 and going up to £500,000 with fixed monthly repayments for the initial 5 or 10 years. The fixed rate can be reserved 3 months before booking, which is useful if you want to make the most of the low rate at the moment. Early repayments incur fees, but Lloyds tells you what the break costs will be at the beginning of your term.
For all loans there’s an arrangement fee, which is relative to how much you want to borrow – for instance, if you need up to £5,000 the bank charges £100, but if you’re borrowing between £15,001 and £1 million the charge is 1.5% of the loan. And you need to be a sole trader, partner of a director to apply.
Are any of these types of financing right for your SME? Before going to Lloyds or other high street banks, look into alternative finance (altfi) providers too to get a better picture of what's available.
Altfi helps meet demand for lending
Banks have cut their lending in recent years, although there have been reported increases in the market, partly due to the government-backed Funding for Lending Scheme.
But, there’s still a shortfall in the supply for small business loans. Why? One of the reasons is that many SMEs don’t meet the strict criteria of the high street banks. Another is that many smaller enterprises need cash quickly for short-term loans but big banks can take too long to process applications. Plus, they rely heavily on credit scores, which isn't always helpful for small businesses or startups.
There's been a boom in altfi providers since the recession, which are helping to bridge the gap between the bank funding and SMEs. Lenders like Fleximize, offer more flexible lending terms, a faster application process and rapid delivery of money, to enable smaller enterprises to continue building their businesses, instead of waiting around for a landing decision.