A business loan is a commercial term loan made to a business either on an unsecured basis, or secured against property assets or secured with a floating charge debenture over the companies full assets.
A business loan should complement the role of the business overdraft with the latter generally being used for day to day working capital but with the former taken on for a specific purpose.
You may require an injection of capital into the business for a variety of reasons. A business loan facility can complement other methods of raising working capital such as asset finance or factoring so when considering a business loan this is generally used for broader reasons as follows:
• To assist in the set-up of a new business
• To assist in the purchase of a trading business
• A new project / expansion
• For longer-term capital investment into the business
• To facilitate the purchase of the company premises
Business loans are a legitimate business expense and as such can be used by your accountant to offset your tax bill so any lending to the business is tax efficient. Unlike an overdraft, payments to a business loan facility are generally amortizing so over the period of the loan the debt is being paid off until at final payment the debt is redeemed in full.
Finally, business loans can be put into place very quickly when unsecured as the requirement for a solicitor to register the charge against as asset is not required and this removes a lot of stages from the process.